((Word document of 700–1,000 words with attached Excel Spreadsheet showing calculations 700-1000 words))

Your next assignment as a financial management intern is to apply the knowledge that you acquired while engaging in the cost of capital discussion that you had with your colleagues. In this task, you will be calculating the weighted cost of capital for a firm using the book value of the components and the concepts presented in this phase.

Using the most current annual financial statements from the company you analyzed in Phase 1, determine the percentage of the firm’s assets that are currently be financed with debt (total liabilities), preferred stock, and common stock (common equity). It is very possible that your firm will have very little or no preferred stock, so in this class, the percent would be “zero.” Your ratios should add up to 100%. You will also need to calculate the firm’s average tax rate using the income tax expense divided by the firm’s income before taxes. Use the following tables:

Company	Total Assets	Total Liabilities	Total Preferred Stock	Total Common Equity
Dollar Value
% of Assets

Company

Income before Tax

Income Tax Expense

Average Tax Rate (%)

The first component to determine is the cost of debt. You mentor suggests using the Web site that you used in the previous Phase to find the pretax yield-to-maturity of a bond with at least 5 years left before maturity. Using the following table, calculate the firm’s after-tax cost of debt:

Yield to Maturity	1 – Average Tax Rate	After-tax Cost of Debt

Now you will need to calculate the cost of preferred stock. You can use the following table:

Annual Dividend

Current Value of Preferred Stock

Cost of Preferred Stock (%)

To calculate the cost of common equity, you can use the CAPM model. Using current stock data, the yield on the 5-year treasury bond, and the return on the market calculated in Phase 2, you can calculate the cost of common equity using the following table:

5-year Treasury Bond Yield (risk-free rate)	Stock’s Beta	Return on the Top 500 Stocks (market return)	Cost of Common Equity

Now, you can use the cost and ratios from above to calculate the firm’s weighted average cost of capital (WACC) using the following table:

After-Tax Cost of Debt	Cost of Preferred Stock	Cost of Common Equity	WACC
Unweighted Cost
Weight of Component
Weighted Cost of Component

• After completing the required calculations, explain your results in a Word document, and attach the spreadsheet showing your work. Be sure to explain the following:
  • How would you expect the weighted average cost of capital (WACC) to differ if you had used market values of equity rather than the book value of equity, and why?
  • What would you expect would happen to the cost of equity if you had to raise it by selling new equity, and why?
  • If the after-tax cost of debt is always less expensive than equity, why don’t firms use more debt and less equity?
  • What are some of the advantages and disadvantages of raising capital by using debt?
  • How would “floatation costs” impacted the WACC, and how could they have been incorporated in the formula?

Note: You can find information about the top 500 stocks at this Web site.

In anticipation of Mary’s request for comparative analysis, it will be useful at this time to do some research. You know that you can obtain the financials of companies within the same sector or Standard Industry Code as Apix Printing (e.g., commercial printing), and that the North American Industry Classification System (NAICS) Standard Industry 2012 code for Apix Printing is presently 323111. Use Hoover’s Pro to search for two other companies in the same industry as Apix Printing.

When you get to work the next day, you see the following e-mail from Mary:

Here is the list of financial ratios you asked for. I need you to explain the computation of each and compute these for Apix’s results for the financial statements you are using for the PowerPoint presentation. Also, compare Apix’s 2-year trend results to that of two other firms in the sector. Indicate how each of Apix’s ratios differ, and indicate whether the two other companies’ ratios or Apix’s ratios are indicative of better performance.

Explain the computation for each of the following, and compute each for Apix and two other companies in the same industry as Apix Printing:

• Current ratio
• (Long-term) debt to equity ratio
• Gross margin percentage
• Net profit margin percentage
• Return on equity percentage

Present your findings of the above data in a table. Add a paragraph that summarizes your results, indicating whether investors would find the financial analysis results of Apix competitive as compared to rivals in the sector. Be sure to include both positive and negative trends in your analysis.

Market Structures and Pricing Decisions Applied Problems*** Each part numbered showing all work pls read assignment carefully. Put in a word document!!!!!

Please complete the following two applied problems:

Problem 1: 

Robert’s New Way Vacuum Cleaner Company is a newly started small
business that produces vacuum cleaners and belongs to a
monopolistically competitive market. Its demand curve for the product is
expressed as Q = 5000 – 25P where Q is the number of vacuum cleaners
per year and P is in dollars. Cost estimation processes have determined
that the firm’s cost function is represented by TC = 1500 + 20Q +
0.02Q2. 

Show all of your calculations and processes. Describe your
answer for each question in complete sentences, whenever it is
necessary.

1. What are the profit-maximizing price and output levels?
   Explain them and calculate algebraically for equilibrium P (price) and Q
   (output). Then, plot the MC (marginal cost), D (demand), and MR
   (marginal revenue) curves graphically and illustrate the equilibrium
   point.
2. How much economic profit do you expect that Robert’s company will make in the first year?
3. Do you expect this economic profit level to continue in subsequent years? Why or why not?

Problem 2: 

Greener Grass Company (GGC) competes with its main rival, Better
Lawns and Gardens (BLG), in the supply and installation of in-ground
lawn watering systems in the wealthy western suburbs of a major
east-coast city. Last year, GGC’s price for the typical lawn system was
$1,900 compared with BLG’s price of $2,100. GGC installed 9,960 systems,
or about 60% of total sales and BLG installed the rest. (No doubt many
additional systems were installed by do-it-yourself homeowners because
the parts are readily available at hardware stores.) 

GGC has substantial excess capacity–it could easily install
25,000 systems annually, as it has all the necessary equipment and can
easily hire and train installers. Accordingly, GGC is considering
expansion into the eastern suburbs, where the homeowners are less
wealthy. In past years, both GGC and BLG have installed several hundred
systems in the eastern suburbs but generally their sales efforts are met
with the response that the systems are too expensive. GGC has hired you
to recommend a pricing strategy for both the western and eastern suburb
markets for this coming season. You have estimated two distinct demand
functions, as follows: 

Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag – 1500Ab + 0.2Yw 

for the western market and 

Qe = 36620 – 25Pge + 7Pbe + 1180Ag – 950Ab + 0.085Ye 

for the eastern market, where Q refers to the number of units
sold; P refers to price level; A refers to advertising budgets of the
firms (in millions); Y refers to average disposable income levels of the
potential customers; the subscripts w and e refer to the western and
eastern markets, respectively; and the subscripts g and b refer to GGC
and BLG, respectively. GGC expects to spend $1.5 million (use Ag = 1.5)
on advertising this coming year and expects BLG to spend $1.2 million
(use Ab = 1.2) on advertising. The average household disposable income
is $60,000 in the western suburbs and $30,000 in the eastern suburbs.
GGC does not expect BLG to change its price from last year because it
has already distributed its glossy brochures (with the $2,100 price
stated) in both suburbs, and its TV commercial has already been
produced. GGC’s cost structure has been estimated as TVC = 750Q +
0.005Q2, where Q represents single lawn watering systems. 

Show all of your calculations and processes. Describe your
answer for each item below in complete sentences, whenever it is
necessary.

1. Derive the demand curves for GGC’s product in each market.
2. Derive GGC’s marginal revenue (MR) and marginal cost
   (MC) curves in each market. Show graphically GGC’s demand, MR, and MC
   curves for each market.
3. Derive algebraically the quantities that should be produced and sold, and the prices that should be charged, in each market.
4. Calculate the price elasticities of demand in each
   market and discuss these in relation to the prices to be charged in each
   market.
5. Add a short note to GGC management outlining any
   reservations and qualifications you may have concerning your price
   recommendations

Question 2

Describe a situation in your intern ship, or previous work, where you have taken account of an Australian Standard in fulfilling your ICT task, and why. If you have not already experienced such situation, describe a situation in your intern ship where you will need to take account of an Australian standard in fulfilling your ICT task, and why. Be specific.

Write approx 250 words in your initial answer to this.

Note:- My intern ship address is :- www.cibt.nsw.edu.au

Thank you.