Airjet Best Parts, Inc. Part 1

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Finance| | | | | | | | | |
Course Project - Part 1 - Task 1: Assessing loan options for AirJet Best Parts, Inc. | | | | | | | | | | | | | | | |
Question 1:| APR (given)| EAR (calc)| | 2nd ICONV| | | | | | National First | 3.25 + 6.75 = 10%| 10.25| | NOM = 10%| | | | | | | | | | C/Y = 2 (semiannual)| | | | | |

| | | | EFF = 10.2500| | | | | |
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Regions Best| 13.17| 13.99| | 2nd ICONV| | | | | | | | | | NOM = 13.17%| | | | | |
| | | | C/Y = 12 (monthly)| | | | | |
| | | | EFF = 13.9948| | | | | |
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Question 2:| | | | | | | | | |
I would recommend that AirJet Best Parts, Inc. take the loan that National First is offering since the interest rate is only compounded| | semi-annually, making it lower that that of Regions Best. The loan with National First has an Effective Annual Rate of 10.25,| | | whereas Regions Best's EAR is calculated at 13.99%. If the loans with Regions Best is taken, AirJet would be paying 3.74% more | | than they would have with National First.| | | | | | | | | | | | | | | | | | |

Question 3:| | | | | | | | | |
AirJet Best Parts, Inc. Loan with Regions Best| | | | | | | | APR: 8.6%| Term: 5 years| | | | | | | | |
Loan Amount $6,950,000| | | | | | | | |
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N = 60 (12 x 5)| | | | | | | | | |
I = .7167 (8.6/12)| | | | | | | | | |
PV = $6,950,000| | | | | | | | | |
PMT = ??| | | | | | | | | |
FV = 0| | | | | | | | | |
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The payment will be $142,926.43 (rounded)| | | | | | | | | | | | | | | | | | |
I think that AirJet Best Parts, Inc. has made a good decision to choose Regions Best if the APR is in fact 8.6%. That would make | | the Effective Interest Rate 8.9739%, which is ultimately lower than that offered by Nations First. | | | | | | | | | | | | | | |

Course Project - Part 1 - Task 2: Evaluating Competitor's Stock | | | | | | | | | | | | | | | |
Question 1:| Boeing Co. (BA)| Information retrieved from Yahoo Finance| | | | | | | | | | | | | | | |
Price of Stock Today (Po) - $62.16| | | | | | | | | Last Quarterly Dividend (Do) - $.42| | | | | | | | | Last Yearly Dividend (Do) - $1.68| | | | | | | | | Dividend Growth Rate (g) - 5%| | | | | | | | |

Find the Required Rate of Return (R): ON YEARLY DIVIDENDS OF $1.68 per share| | | | | | | | | | | | | | |
Po = Do (1 + g) / Po + g = D1 / Po + g| | | | | | | | | | | | | | | | | | |
1.68 (1 + .05) / 62.16 = 1.7640/62.16 = .0284 + .05 = .0784 = 8%| | | | | | | | | | | | | | | | |
The required rate of return is 8% when calculating the quarterly dividends as a whole (.42 per quarter x 4 quarters = $1.68)| | | | | | | | | | | | |
Find the Required Rate of Return (R): ON QUARTERLY DIVIDENDS OF $.42 per share| | | | | | | | | | | | | | |
.42 (1 + .05) / 62.16 = .4410 / 62.16 = .0071 + .05 = .0571 = 6%| | | | | | | | | | | | | | | | |
The required rate of return is 6% when calculating theLAST quarterly dividend paid out on June 5, 2010 | | | | | | | | | | | | | |
Question 2:| | | | | | | | | |
Using the YEARLY rate of return of 8%| | | | | | | | | g = 1%| | | | | | | | | |
Do = $1.50| | | | | | | | | |
What should be the current share price of AirJet Best Parts, Inc.?| | | | | | | | | | | | | | | | |
Po = Do (1 + g) / R - g| | | | | | | | | |
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1.50 (1 + .01) / .08 -...
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