( I ONLY NEED THE THIRD SOLUTION )

Situation #1: Capital Investment Decisions - 5 questions

Professor Willis Corporation (PWC) has projected a sales volume of $2,450 for the second year of a proposed expansion project based off of their current production levels. Costs normally run at 65 percent of the sales, or about $1,593 in this case. The depreciations expense will be $100 and the tax rate is 21 percent.

The expansion project will allow Professor Willis Corp. to purchase a brand-new machine to increase productivity. The new machine will cost $500,000 with a five-year life without any salvage value. The financial team has determined that depreciation is straight-line to zero. Upper management requires that there be a return of 15 percent and the tax rate is still 21 percent on the item. The operations division at PWC believes that the new machine will be capable of producing 400 additional units per year compared to what their current capacity is producing. The price per unit is $3,000 with variable cost per unit at $1,900. The additional fixed costs that need to be factored in with this project is an additional $250,000 per year. PWC will not need to utilize net working capital for this project.

The finance department within PWC believes that the unit sales, variable costs, and the fixed cost projections for the new machinery are accurate within 5 percent.

1. 1)For the proposed expansion project,calculatethe operating cash flow?
2. 2)For the new machinery project,calculatethe upper and lower bounds for these project
3. projections?
4. 3)For the new machinery project at 15%, the five-year annuity factor of 3.35216,calculatethe following:
5. Base-case NPV
6. Best-case NPV
7. Worst-case NPV

Situation #2: WACC - 1 question

You have been provided the following information about Professor Willis Corporation (PWC):

Debt

Common Stock

Preferred Stock Market

13,000 6.4 percent coupon bonds outstanding with 15 years to maturity and a quoted price of 107. These bonds will pay interest semiannually

There are 345,000 shares currently selling for $76.50 per share. The stock has a beta of .90 and will pay dividends of $3.80 next year. The dividends are expected to grow by 5 percent per year every year.

There are 10,000 shares of 4.4 percent preferred stock currently selling for $87.00 per share.

11 percent expected return, with a risk-free rate of 3.6 percent and a 22 percent tax rate.

1) Calculate PWC's WACC?

Situation #3: Cash Accounts and Operating Cycles - 24 questions

1. 1)For each of the scenarios listed below, indicate what kind of impact will occur to Professor Willis Corporation's cash account. For each of these situations the answers can only beNo Impact,Decrease Cash, orIncrease Cash. No other responses will be accepted.
2. Year-end dividends will be paid with funds from the sale of debt
3. A short-term loan is taken out to purchase real estate
4. Inventory is purchased on short-term (30 day) credit
5. Finance department repays a short-term bank loan
6. The Corporate Finance team prepays next years taxes
7. PWC repurchases outstanding preferred stock
8. PWC sells product to customers on credit
9. Corp finance pays the interest on its long-term debt
10. PWC collected payments on sales purchased on credit
11. PWC AP balance is reduced
12. Year-end dividends are paid now
13. Production supplies are purchased and paid for using a short-term note
14. Operational bills are paid
15. Cash is utilized to purchase raw materials
16. Marketable securities are purchased
17. 2)For each of the scenarios listed below, indicate what kind of impact will occur to Professor Willis
18. Corporation's Operating Cycle. For each of these situations the answers can only beNo Change,Decrease Cycle, orIncrease Cycle. No other responses will be accepted.
19. Average receivables go up
20. Credit payment times for the customers increase from Net 30 to Net 45
21. More finished goods are produced for inventory instead of for order
22. Inventory turnover increases from 4 times to 8 times
23. Payables turnover increases from 5 times to 9 times
24. Receivables turnover increase from 6 times to 8 times
25. Fewer raw materials than usual are purchased
26. PWC payments to the suppliers is accelerated
27. An increase in the number of customers beginning to pay in cash instead of credit