Chapter 12, Question 5- A share of stock with a beta of .69 now sells for $50. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 6%, and the market risk premium is 9%.

 

a.	Suppose investors believe the stock will sell for $52 at year-end. Is the stock a good or bad buy? What will investors do?

 

The stock is a buy and the investors .

 

b.	At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Stock price

$

 

 

Chapter 12 Question 4- A share of stock with a beta of .85 now sells for $60. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 4%, and the market risk premium is 7%. If the stock is perceived to be fairly priced today, what must be investors’ expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

 

 

Stock price

$

 

Chapter 13, Question 1- In 2013 Caterpillar Inc. had about 758 million shares outstanding. Their book value was $40 per share, and the market price was $94.00 per share. The company’s balance sheet shows that the company had $33.5 billion of long-term debt, which was currently selling near par value.

 

 

a.	What was Caterpillar’s book debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)

 

Book value

 

b.	What was its market debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)

 

Market value

 

c.	Which measure should you use to calculate the company’s cost of capital?
	Book value   Market value

 

Chapter 13 Question 2-Olympic Sports has two issues of debt outstanding. One is a 8% coupon bond with a face value of $24 million, a maturity of 15 years, and a yield to maturity of 9%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 9%. The face value of the issue is $29 million, and the issue sells for 96% of par value. The firm’s tax rate is 30%.

 

 

a.	What is the before-tax cost of debt for Olympic? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

Before-tax cost of debt

%

 

b.	What is Olympic’s after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

After-tax cost of debt

%

 

Chapter 13, Question 4-Reliable Electric is a regulated public utility, and it is expected to provide steady dividend growth of 8% per year for the indefinite future. Its last dividend was $2 per share; the stock sold for $40 per share just after the dividend was paid. What is the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

 

Cost of equity

%

 

Question 6, Chapter 13- Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 32% of the company’s present value, and you believe that at this capital structure the company’s debtholders will demand a return of 6% and stockholders will require 13%. The company is forecasting that next year’s operating cash flow (depreciation plus profit after tax at 40%) will be $70 million and that investment expenditures will be $32 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year.

 

 

a.	What is the total value of Icarus? (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole dollar amount.)

 

Total value

$ million

 

b.	What is the value of the company’s equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

 

Company’s equity

$ million

 

 

 

120.3

 

(Click to select)

 

(Click to select)

 

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Pinto – Case Study 5.4 (193-194) – The Expeditionary Fighting Vehicle

This assignment involves that the student read the case study and answer all questions at the end of the case study in a 4-5 page paper. Your answers must include substantial support from at least two (2) scholarly journal articles on project management. See below for advice on how to find these journal articles. Refer to the course schedule matrix for due dates for all case assignments. All case study assignments are due at 11:59 p.m. EST (Sunday) on the assigned week.

This course requires that the student is able to conduct weekly online library research by utilizing UC’s Library (online) in order to locate scholarly journals such that the student can successfully complete weekly papers regarding cases and/or articles in project management, and such that the student can engage in the weekly assignments.  The following is one example of how to navigate iLearn and the online Library in order to conduct research:

Log onto your course on iLearn

Go to the home page for this course

Click on the “Library Resources” icon in the left-hand column of this webpage, This will open the Library webpage.

Under the search boxes for the UC Mega Search click the box to the left of the phrase Scholarly (Peer Reviewed) Articles. Then click the Search box.

This will give you a Basic Search page. Under the Search boxes click Advanced Search.

The Advanced Search will appear with three (3) search boxes.

In the first box type “project management”

Change the “Select a Field (optional)” selection to “SO Journal Source/Title”.

In the second box type any of your search terms (“scope”, monitoring”, etc.)

Change the “Select a Field (optional)” to “TX All Text”.

You can either add an additional search term in the third box or hit the blue Search button.

This will bring up a large selection of potential articles based upon your search parameters. You can narrow down your search by using additional search terms.

Every paper typed in this course should be in APA formatting (title page, reference page, NO abstract page, in-text citations, running head, page numbers, Times New Roman 12 font, 1 inch margins, double-spacing, etc…).  Points will be deducted for papers that are not typed in APA formatting.  Also, every paper in this course needs to be based on research from a scholarly source that is retrieved from UC’s Library.  Your weekly research papers should include two sources, the textbook and the scholarly case/article that you found.  Papers that are not based on a scholarly source(s) will receive a grade of “0.”

Questions

1) What does the story of the EFV suggest about the importance of considering what a project’s key mission is supposed to be prior to authorizing it?

2) The EFV has been labeled, “The wrong weapon for the wrong war at the wrong time.” Do you agree or disagree with this characterization? Why

3)  Why does the EFV failure illustrate the dangers of long lead-times for weapon systems? In other words, when a project’s development cycle takes 20 years from start to finish, what dangers do the project developers face when the project is finally operational?

 

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