Managerial Finance: Assignment 1 Name: _______________________ Grade: _______________________ Problem : 1 Cash Flows (20 points) SIMILAR TO P1-3 Joni plans, monitors, and assess her financial position using cash flows over a month. She has a savings account and her bank loans money at 7.75% per year while it offers short-term investment rates of 3.5%. Jonis cash flows during November were as follows: Item Cash Inflow Cash Outflow Clothes $740 Interest received $320 Dining out 430 Groceries 715 Salary 5,350 Auto payment 360 Utilities 310 Mortgage 1,150 Gas 250 a. Determine her total cash inflows and cash outflows. Total cash inflow: Total cash outflow: b. Determine the net cash flow for the month of November. c. If there is a shortage, what are a few options open to Joni? d. If there is a surplus, what would be strategies for her to follow? Give two specific examples. Problem 2: Marginal Cost-benefit analysis and the goal of the firm (28 points) Similar to P1-4 Steve, the capital budgeting analyst for Hamilton Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $630,000 over the next 5 years. The existing robotics would produce benefits of $380,000 over that same period. An initial investment of $245,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $45,000. Show how Steve will apply marginal cost benefit analysis techniques to determine the following: a. The marginal added benefits of the proposed new robotics b. The marginal added cost of the proposed new robotics c. The net benefit of the proposed new benefits d. What should Steve recommend the company do? Give detailed explanation as to why? Problem 3: Initial Public Offering (30 points) Similar to P2-3 On May 7, 2019, Fishers Co., completed its IPO on the NYSE. Fishers sold 10,240,000 shares of stock at an offer price of $12 with an underwriting discount of $.75 per share. Fishers closing stock price on the first day of trading on the secondary market was $15.00 and 76,000,000 shares were outstanding. Round answers to nearest hundredth. a. Calculate the total proceeds for Fishers IPO. b. Calculate the percentage underwriter discount. c. Calculate the dollar amount of the underwriting fee for Fishers IPO. d. Calculate the net proceeds for Fishers IPO. e. Calculate Fishers IPO underpricing. f. Calculate Fishers market capitalization. Problem 4: Initial Sale Price of common stock (10 points) Similar to P3-7 Rice Co. has one issue of preferred stock and one issue of common stock outstanding. Given Rices stockholders equity account that follows, determine the original price per share at which the firm sold its single issue of common stock. Round to nearest hundredth. Preferred stock $132,000 Common stock ($.50 par, 300,000 shares outstanding) $150,000 Paid in capital in excess of par on common stock $2,856,000 Retained earnings $1,000,000 Total stockholders equity $3,800,000 Answer: _________________________ Problem 5: Statement of retained earnings (12 points) Similar to P3-8 Obrien Industries began 2019 with retained earnings balance of $735,000. During 2019, the firm earned $280,000 after taxes. From this amount, preferred stock holders were paid $42,000 in dividends and common stock dividends were $175,000. What is the amount of retained earnings at December 31, 2019?