Discuss Financial

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  • For each discussion question, you need to answer the question with more than 250 words paragraph. Cite your sources to justify your claims for text answers.

 

For each question and each answer, use apa 7th format

 

Question 1: Review “Mini Case: Planning for Growth at S&S Air”in attached image, Then, answer the following questions:

 

  • Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean? How do you know?
  • S&S Air is planning for a growth rate of 12% next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the company’s sales increase at this growth rate? Explain your reasoning.
  • Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, a company has a “staircase” or “lumpy” fixed cost structure. Assume S&S Air is currently producing at 100% capacity. As a result, to increase production, the company must set up an entirely new line at a cost of $5,000,000. Calculate the new EFN with this assumption. What does this imply about capacity utilization for the company next year?

 

Question 2:

Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay the owner of each security $100,000 on March 28, 2038, but investors would receive nothing until then. Investors paid TMCC $24,099 for each of these securities; so they paid $24,099 on March 28, 2008 for the promise of a $100,000 payment 30 years later.

  • Why would TMCC be willing to accept such a small amount today ($24,099) in exchange for a promise to repay about four times that amount ($100,000) in the future?
  • A feature of this particular deal is that TMCC has the right to buy back the securities on the anniversary date at a price established when the securities were issued. What impact does this feature have on the desirability of this security as an investment?

 

 

Question 3:  Four years ago, Bling Diamond, Inc., paid a dividend of $1.65 per share. The company paid a dividend of $2.10 per share yesterday. Dividends will grow over the next five years at the same rate they grew over the last four years. Thereafter, dividends will grow at 5% per year.

 

  • What will the company’s dividend be in seven years?
  • Based on the dividend growth model, what are the two components of the total return on a share of stock? Which do you think is typically larger?

 

 

Question 4: The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, it is a “golden opportunity.” The mine will cost $3,400,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $575,000 at the end of the first year, and the cash inflows are projected to grow at 8% per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $450,000 at the end of Year 11.

 

  • What is the IRR for the gold mine?
  • The Utah Mining Corporation requires a return of 13% on such projects. Should the mine be opened?

 

 

 

Discussion Question Grading Rubric.

 

 

 

 

Criteria  

Performance Indicators 

(Observation descriptors indicating extent to which criterion is met.)
 

Exemplary

  

Proficient

  

Needs Improvement
40, 38, 36, 34, 32 30, 28, 26, 24, 22 20, 18, 16, 14, 12
Depth of Initial Post

 

40% of overall grade

 Student answers the discussion question prompt completely with examples and/or reasoning. Student answers the prompt almost completely with examples and/or reasoning. Student answers the prompt partially but does not include examples and/or reasoning.
Option  40, 38, 36, 34, 32 30, 28, 26, 24, 22 20, 18, 16, 14, 12
Depth of Peer Responses

 

40% of overall grade

 Student responses to peers are well-conceived, offering insight and examples. Student responses to peers are mostly well-conceived, and are supported by insight and examples. Student responses to peers are partially complete, and/or lack clarity.
20, 19, 18, 17, 16 15, 14, 13, 12, 11 10, 9, 8, 7, 6
Accountability

 

20% of overall grade

 Students posts initial response to DQ prompt and to peer responses on time. Student is late when posting initial response to DQ prompt and/or to peer responses, but has a viable excuse and has notified the professor in advance – OR – Student posts one response on time and one post late. Students is late when posting initial response to DQ prompt AND peer responses – OR – Student posted initial response on time but no peer response.