1. ConnPress bought a new $1 million print press. Half of the cost came from its own cash balance and the other half was financed by a bank loan with 5% interest rate. The new press is expected to generate $1 million new revenue for ConnPress per year and the related costs are expected to be 60% of the revenue. The press is expected to depreciate in a straight line over 10 years.

a) Please list all the changes in ConnPress balance sheet right after the purchase of the press. b) Please show all the changes in income statement of the company and calculate the net

income in its first year of operation. Tax rate for ConnPress is 20%.

c)Ifa half of ConnCorp's revenue is paid in credit, instead of cash, what is the cash

flow from operation in the first year? What is the cash flow from financing and cash flow

d)If ConnPress can change the depreciation rate from 10 year straight line to 5 year

straight line, should the company do it? Explain.

2.Several years ago, The Wall Street Journal reported that the winner of the Massachusetts State Lottery had the misfortune to be both bankrupt and in prison for fraud. The prize was $9,420,713, to be paid in 19 equal installments. (1/19th of $9,420,713 is paid in each installment) The bankruptcy court judge ruled that the prize should be sold off to the highest bidder and the proceeds used to pay off the creditors.

a) If the interest rate was 8%, how much would you bid for the prize?

b) Enhance Reinsurance Company was reported to have offered $4.2 million. Use Excel to find the return that the company is looking for.

Answer rating: 100% (QA)

answer a Changes in ConnPress Balance Sheet After the purchase of the print press the changes in ConnPress balance sheet would be as follows Assets In... View the full answer