The Allied Group intends to expand the company’s operation by making significant investments in several opportunities available to the group. Accordingly, the group has identified a need for additional financing in preferred and new common stock and new bond issues. The risk-free rate for the company is 7%, and the appropriate tax rate is 40%. Also, the beta coefficient for the company is 1.3 and the market risk premium (Km) is 12.

New Debt

The company has been advised that new bonds can be sold on the market 

at par ($1000) with an annual coupon of 8%, for 30 years.

New Common Stock 

Market analysis has determined that given the positive history of the firm, 

new common stock can be sold at $29 per share, with the last dividend being 

paid of $2.25 per share. The growth rate on any new common stock has 

been estimated at a constant rate of 15% per year for the next 3 years.

Preferred Stock 

New Preferred Stock can be issued with an annual dividend of 10% of par 

and is paid annually and currently would sell for $90 per share.

Questions: Address all of the following questions in a brief but thorough manner.

• Using the Capital Asset Pricing Model (CAPM), discuss and calculate the cost of new common stock.
• What would the dividend yield as a percentage (i.e., per dividend payment divided by the book value of a share of stock) today and a year from now if the growth rate is 12%?
• What is the after tax component cost as a percentage (e.g., interest rate) of new debt today?

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Strategic decision makers are required to be able to evaluate projects based on the long-term objectives of the firm as well as the project’s ability to earn the company additional compensation. The 3 main tools used to make this evaluation are the pay-back period, net present value (NPV), and internal rate of return (IRR).

Using the data in the tables above, answer the following questions:

• Calculate the NPV for each project using each scenario’s NPV rate. Show your work.
• Calculate the pay-back period for each project. Show your work.
• Calculate the IRR for each project. Show your work.
• Which project would the company select using the NPV method in scenario 1? Explain your answer.
• Which project would the company select using the NPV method in scenario 2? Explain your answer.
• Which project would the company select using the NPV method in scenario 3? Explain your answer.
• Which project would the company select using the pay-back period? Explain your answer.
• Which project would the company select using the IRR method? Explain your answer.

Deliverable Length: 800–1,000 words

No plagiarism please.

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• Part 1 :Suppose you have been working with the federal government for a period of time, and you decide to form a small company. Explain the difference between depreciation and the facilities capital cost of money. Specify the key advantages of having facilities capital cost of money as an allowable cost. Justify your response

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DISCUSSION 1:

To put it very simply, the price floor is the bottom dollar for an item. This keeps the markets stable and the prices somewhat feasible so the markets do not tank due to the lack of demand for a certain product. A Price ceiling is the max price the product can be sold for. The ceilings are in place to keep the prices somewhat under control to help prevent over inflation or bubbles in certain markets.

DISCUSSION 2:

There are two types of price controls: price ceilings and price floors. The difference between them is whether the government is setting a minimum or maximum price for something. A price ceiling is the legal maximum price for a good or service, while a price floor is the legal minimum price. Although both a price ceiling and a price floor can be imposed, the government usually only selects either a ceiling or a floor for particular goods or services. When prices are established by a free market, then there is a balance between supply and demand. When the government imposes price controls, then there will be either excess supply or excess demand, since the legal price is often very different from the market price. Indeed, the government imposes price controls for the very reason that it is not satisfied with the market price.

A price ceiling creates a shortage when the legal price is below the market equilibrium price, but has no effect on the quantity supplied if the legal price is above the market equilibrium price. A price ceiling that is below the market equilibrium price creates a shortage that causes consumers to compete vigorously for the limited supply. Supply is limited because suppliers are not getting the prices that would allow them to earn a profit. Likewise, since supply is proportional to price, a price floor creates excess supply if the legal price is above the market price. Suppliers are willing to supply more at the price floor than the market wants at that price.

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Assignment  Not All Companies Are Viewed as Equal  

In the land of free trade, the public does not view all industries as equal. Do you believe that is ethical? Do you believe that some industries are unfairly targeted? Should it be consumers’ choice to partake in products that are not healthy for them, or do those companies have an ethical obligation to protect people? In this assignment, you will choose one (1) industry to write about. Possible industries to research could be tobacco, soda, alcohol, casinos, or candy companies, just to name a few.

Write a one and a half to two (2 – 3) page paper in which you:

1 Become an advocate for either the consumer or the industry. Prepare an argument

explaining the major reasons why you support either the consumer or the industry.

2.  Explain the role capitalism plays in corporate decision making.

3.  Discuss if you believe it is possible for a company to cater to both its best interest and that of the consumer conjointly or if one always has to prevail. Justify your response.

4 Use at least two (2) quality references. Note: Wikipedia and similar Websites do not qualify as academic resources.

5 Format your assignment according to the following formatting requirements:

a.  Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.

b.  Include a cover page containing the title of the assignment, your name, your professor’s name, the course title, and the date. The cover page is not included in the required page length.

c.  Include a reference page. Citations and references must follow APA format. The reference page is not included in the required page length

The specific course learning outcomes associated with this assignment are:

·  Determine the considerations for and process of ethical business decision making to balance corporate and social responsibilities, and address moral, economic, and legal concerns.

·  Analyze selected business situations using the predominant ethical theories, such as utilitarian, Kantian, and virtue ethics to guide ethical business decision making.

·  Use technology and information resources to research issues in business ethics.

·  Write clearly and concisely about business ethics using proper writing mechanics.

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