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Please delete your response by one day after you send it ( so my teacher wont be able yo catch me )

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INSTRUCTION FOR SUBMISSION OF ASSIGNMENT 1. Group Leader should e-sign the assignment before submission. 2. Submit the softcopy through blackboard. Weight of this assignment 15%. 3. There no upper limit for words to answer the question. Use sufficient words/ paragraphs to cover up your answer. For calculation questions MUST show the calculation steps. ASSIGNMENT DETAILS Assignment Title: ASSIGNMENT 2 - MODULE 4,5 & 6 Lecturer's Name MR. NASIR MAHMOOD Program Name Course Code FIN220 Course Name PRINCIPLES OF FINANCE Due Date Last Class of Week 14 Date submitted REQUEST FOR EXTENSION All work must be submitted by the due date. An application to extend the due date on the basis of special consideration must be authorized by the course lecturer. Late submission without prior approval will have 0.5 negative mark for each day. Extension granted until (date) N/A Lecturer's Signature Remarks: Cheating & assisting to cheat are offences under the Yanbu University/Industrial College's policy. STUDENTS' STATEMENT I have read and understood the information provided on this assignment cover sheet and in the college's policy relating to cheating and assisting to cheat, collaboration and plagiarism. I certify that the attached work is entirely my own effort except where work quoted is duly acknowledged in the text; that I have not worked with another person or persons except where specifically permitted by the lecturer, and that this work has not been submitted for assessment by myself or any other person in any other time. I have retained a copy of my work. Student's Signature: Mark/Grade Assessed by & Date 1 Question 1. You are considering a project with an initial cash outlay of $150,000 and expected free cash flows of $35,000 at the end of each year for 6 years. The required rate of return for this project is 9 percent. (6 Marks) a. What is the project's payback period? b. What is the project's NPV? c. What is the project's PI ? d. What is the project's IRR ? Question 2. Abdullah & Sons Corporation is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $8,000,000, and the project would generate incremental free cash flows of $2,000,000 per year for 5 years. The appropriate required rate of return is 7 percent (6 Marks) 1. Calculate the NPV and suggest that should the project be accepted? b. Calculate the PI. 6. Calculate the IRR d. If Abdullah & Sons Corporation required rate of return is changed to 14 percent, then should this project be accepted Question 3. in early 2020, Exim Corporation issued new common stock at a market price of $25. Dividends last year were $1.50 and are expected to grow at an annual rate of 4 percent forever. Floatation costs will be 4 percent of market price. What is Exim's cost of equity for the new issue? (2 Marks) Question 4. SAMREF is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 10 years. Investors are willing to pay $1,200 for the bond. Floatation costs will be 4 percent of market value. The Company is in a 25 percent tax bracket. What will be the firm's after-tax cost of debt on the bond? (3 Marks) Question 5. The preferred stock of LLC International sells for $40 and pays 5 percent dividends. The net price of the stock is $35. What is the cost of capital for the preferred stock? (2 Marks) Question 6. Crawford Enterprises is a publicly held company located in Arnold, Kansas. The firm began as a small tool and die shop but grew over its 35-year life to become a leading supplier of metal fabrication equipment used in the farm tractor industry. At the close of 2020 the firm's balance sheet appeared as follows: (3 Marks) Cash Accounts Receivable Inventories Net Property, Plant, Equipment Total Assets 15,000 75,000 200,000 Long-term Liabilities 3,000,000 Common Equity 3,290,000 Total Debt and Equity 1,790,000 1,500,000 3,290,000 At present, the firm's common stock is selling for a price equal to its book value, and the firm's bonds are selling at par. Crawford's managers estimate that the market requires a 12 percent FIN220 return on its common stock, the firm's bonds command a yield to maturity of 7 percent, and the firm faces a tax rate of 30 percent. What is Crawford's weighted average cost of capital? Differentiate between permanent and temporary assets. Which of them is usually used in working capital? (2 Marks) Question 7. Question 8. A popular theory for managing risk to the firm that arises out of its management of working capital (that is, current assets and current liabilities) involves following the principle of self- liquidating debt. How would this principle be applied in each of the following situations? Explain your responses to each alternative. (6 Marks) I. Longleaf Homes owns a chain of senior housing complexes in the Seattle, Washington, area. The firm is presently debating whether it should borrow short or long term to raise $10 million in needed funds. The funds are to be used to expand the firm's care facilities, which are expected to last 20 years. II. Arrow Chemicals needs $5 million to purchase inventory to support its growing sales volume. Arrow does not expect the need for additional inventory to diminish in the future. III. Blocker Building Materials, Inc. is reviewing its plans for the coming year and expects that during the months of November through January it will need an additional $5 million to finance the seasonal expansion in inventories and receivables