Finance question and answers for August 01, 2023
- Q Create a portfolio using the four stocks and informationbelow:Expected ReturnStandard DeviationWeight in PortfolioStock A21.00%21.00%15.00%Stock B5.00%17.00%28.00%Stock C7.00%12.00%11.00%Stock D22.00%22.00%46.00%----------------------------------------------------------------------------------------Correlation (A,B)0.7000--------------------------------------------Correlation (A,C)0.4900--------------------------------------------Correlation (A,D)0.2500--------------------------------------------Correlation (B,C)0.4400--------------------------------------------Correlation (B,D)0.9600--------------------------------------------Correlation (C,D)0.2000--------------------------------------------(Do not round intermediate calculations. Record youranswers in...
- Q Some events rarely happen but when they do insurance companymust respond appropriately. They fall in a high severity and lowfrequency category but there are effective means of risk transferand financing.Explain...
- Q You will receive $7,600 three years from now. The discount rateis 13 percent. a. What is the value of your investment two yearsfrom now? Multiply $7,600 × .885 (one year’s...
- Q Use the following information for theproblem. ____________________________________________________ State of Probabilityof Returns if State Occurs Economy State ofEconomy StockS Stock T____________________________________________________ Boom 0.10 12% 4% Normal 0.65 9% 6% Recession 0.25 2% 9% ____________________________________________________ a) Find the expectedreturn of each stock.Use...
- Q A stock has the following probability distribution: _____________________________________________________________________ Demand forthe Probability ofthis Rate of return if this Company’sproducts demandoccurring demandoccurs _____________________________________________________________________ Weak 0.10 -50% BelowAverage 0.20 -5% Average 0.40 16% AboveAverage 0.20 25% Strong 0.10 60% ______________________________________________________________________ Calculate the stock’s expectedreturn, variance of returns, and standard deviation of returns.
- Q 1) Best Darn Glasses (BDR) is thinking of investing in asandblasting machine for its glassware. It provides you with thefollowing information: The initial investment for this projectwould be $235,000 in...
- Q Consider stocks of two companies A and B, the table below givestheir expected returns and standard deviation Expected return forStock A 10% Expected return for Stock B 25% Standard deviation...
- Q Walmart Industry Analysis: Conditions, climate, andcompetition of Walmart's industry and segment.
- Q In order to buy a car, you borrow $19500 from a friendat 6%/year compounded monthly for 4 years. You plan to repay theloan with 48 equal monthly payments.a. How much...
- Q Suppose that theTreasury bill rate is 6% and the expected return on the marketstays at 9%. Use the following information.StockBeta (?)United StatesSteel3.09Amazon1.39SouthwestAirlines1.27The TravelersCompanies1.18Tesla1.02ExxonMobil0.90Johnson &Johnson0.89Coca-Cola0.62ConsolidatedEdison0.19Newmont0.10Calculate the expectedreturn from Johnson & Johnson....
- Q In your own words, outline and provide examples of how a companycould pursue shareholder wealth maximization in relation to thefollowing concepts (5 points each): 1) Capital structure 2) Risk& return...
- Q Amy Cola is considering launching a new soft drink product. Thebeverage will be sold in a variety of different flavors and will bemarketed to young children. In evaluating the proposed...
- Q Baker Industries’ net income is $26000, its interest expense is$4000, and its tax rate is 35%. Its notes payable equals $24000,long-term debt equals $75000, and common equity equals $255000. Thefirm...
- Q Internal rate of return and modified internal rate ofreturn. Lepton Industries has three potential? projects,all with an initial cost of ?$1,700,000. Given the discount rateand the future cash flows of...
- Q Lou wants to set up his own landscaping business and needs toborrow $2500 to buy equipment. He wants to keep on top of hispayments so he would prefer to pay...
- Q Matt needs to borrow money to go to college. He has been granteda student loan of $7000. When is school, he actually only needed$6000. He has two options for paying...
- Q At an output level of 45,000 units, you calculate that thedegree of operating leverage is 2.79. Fixed costs are $175,000.a. What is the operating cash flow at 43,000 units? (Do...
- Q A quality service should provide at least meet the quality thatthe customer expects. An insurance company may aim to respond to aclaim advice within a specified timeframe in line, this...
- Q Life assurance companies offer contracts from time to timewhich guarantee income to the policyholder. The attraction of theseproducts and the rate offered at any time vary too. There are useful vehicles...
- Q There are different methods to establish a benefit fundaccessible to an individual when they are not economically active;who is eligible to use them, advantages and disadvantages of eachmethod vary. Sometimes...
- Q You wish to construct a shortbutterfly using the following options. Draw the contingency graphand fully label the graph. (You must label the corresponding dollarvalues for the max gain, max loss,...
- Q The product offers life protection, savings and even hasinvestment component. Even though it runs for a specified period,life assurance companies are flexible to extend cover so that theymake sure that...
- Q The insurance product is unique in that its quality can only bejudged when something goes wrong. The way in which a claim ishandled will have important marketing repercussions for insurers.That...
- Q I completed chapter 12 problem13.I need to complete thefollowing in addition to calculating the project cash flows:compute the NPV and IRR. Given a 10% cost of capital, would yourecommend pursuing...
- Q Hart Venture Capital (HVC) specializes in providing venturecapital for software development and Internet applications.Currently HVC has two investment opportunities: (1) SecuritySystems, a firm that needs additional capital to develop anInternet...
- Q Dickinson Brothers, Inc., is considering investing in a machineto produce computer keyboards. The price of the machine will be$975,000, and its economic life is five years. The machine will befully...
- Q St. Johns River Shipyard’s welding machine is 15 years old,fully depreci- ated, and has no salvage value. However, even thoughit is old, it is still functional as originally designed and...
- Q Read the discussion question posted below, then post a commentof at least 200 words.How are the simple rate, the periodic rate, and the effectiveannual rate related? Can you think of...
- Q NONCONSTANT GROWTH Computech Corporation is expanding rapidlyand currently needs to retain all of its earnings; hence, it doesnot pay dividends. However, investors expect Computech to beginpaying dividends, beginning with a...
- Q You’ve borrowed $60,000 on margin to buy shares in Ixnay, whichis now selling at $44.0 per share. Your account starts at theinitial margin requirement of 50%. The maintenance margin is...
- Q You are purchasing a 2015 Chrysler 200 for $19,400, with20% down. The balance will be financed at 7.6% over seven yearswith monthly payments. Find:Monthly paymentTotal interest chargesInterest in month threeHow...
- Q Problem 12-02AFNequation Broussard Skateboard's sales are expected to increaseby 20% from $7.4 million in 2016 to $8.88 million in 2017. Itsassets totaled $5 million at the end of 2016. Broussard...
- Q Assume that it is now January 1, 2019. Wayne-Martin ElectricInc. (WME) has developed a solar panel capable of generating 200%more electricity than any other solar panel currently on themarket. As...
- Q Jan sold her house on December 31 and took a $15,000 mortgage aspart of the payment. The 10-year mortgage has a 12% nominalinterest rate, but it calls for semiannual payments...
- Q 1. Trades on the NYSE are generally completed by having abrokerage firm acting as a "dealer" buy securities and adding themto its inventory or selling from its inventory. The NASDAQ,...
- Q This question reminds me of the scam emails you always receivestating some unknown relative has died leaving millions from aforeign account. Stating all you have to do is give them...
- Q Geary Machine Shop is considering a four-year project to improveits production efficiency. Buying a new machine press for $768,000is estimated to result in $256,000 in annual pretax cost savings.The press...
- Q Based on the class text book- Principles of Managerial Financeby Gitman & Zutter - Chapter 5-Time Value of Money and Chapter8- Risk and Return and other additional readings, Explain the models...
- Q Assume the role of an investor;Choose one (or more) investments that investor would likelymake from the following choices: common stock, preferred stock,and/or bonds; andAnswer the follow-on questions.First, choose one of...
- Q Photochronograph Corporation (PC) manufactures time seriesphotographic equipment. It is currently at its target debt-equityratio of .85. It’s considering building a new $62 millionmanufacturing facility. This new plant is expected to...
- Q Hart Venture Capital (HVC) specializes in providing venturecapital for software development and Internet applications.Currently HVC has two investment opportunities: (1) SecuritySystems, a firm that needs additional capital to develop anInternet...
- Q The Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$910,000, and it would cost another $24,500 to install it. Themachine falls into...
- Q Vandalay Industries is considering the purchase of a new machinefor the production of latex. Machine A costs $2,140,000 and willlast for 6 years. Variable costs are 37 percent of sales,...
- Q Geary Machine Shop is considering a four-year project to improveits production efficiency. Buying a new machine press for $768,000is estimated to result in $256,000 in annual pretax cost savings.The press...
- Q Blue Angel, Inc., a private firm in the holiday gift industry,is considering a new project. The company currently has a targetdebt-equity ratio of .45, but the industry target debt-equity ratiois...
- Q CALCULATE THE COST OF DEBT;Walmart has at least 50 long-term bonds, the weighted averageyield on these bonds is 3.2%. On the other hand, a simplified costof debt can be calculated...
- Q which among these is plausible:1. Zero based budgeting2. Activity based budgeting3. Rolling budget.
- Q Hastings Corporation is interested in acquiring VandellCorporation. Vandell has 1 million shares outstanding and a targetcapital structure consisting of 30% debt; its beta is 1.30 (givenits target capital structure). Vandell...
- Q FNMA has direct holdings of 30-year fixed-rate mortgagesfinanced by three- to five-year agency securities sold to thepublic.What kind of interest rate option could FNMA use to limit theinterest rate risk?...
- Q Graphically demonstrate Fisher’s Seperation Theorem and provide afull analysis for the case where an individual ends up lending inthe financial markets
- Q Critically evaluate the assumptions upon which the FisherSeperation Theorem is based and assess the extent to which theselimit its usefulness in financial decsion-making
- Q 1.List the three financial system components and their financialfunctions in an effective financial system.2.Identify the four main types of financial markets.3.Describe: a. money markets b. capital markets c. primarymarkets secondary...
- Q Problem 5-22 Yield to Maturity and Yield to Call ArnotInternational's bonds have a current market price of $1,350. Thebonds have an 12% annual coupon payment, a $1,000 face value, and10...
- Q Emma Jones s plain to move this coming summer. She has not yetdecided whether she wants to rent or buy a property here inMississippi. Her monthly budget is $1500 to...
- Q Why do many mutual funds currently sell 3 different classes ofshares? - What are the differences among the three types. - Whatfactors should you consider in choosing one type?
- Q Your firm is contemplating the purchase of a new $666,000computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$64,800 at the...
- Q Mozart Inc.’s $98,000 taxable income for 2017 will be taxed atthe 35% corporate tax rate. For tax purposes, its depreciationexpense exceeded the depreciation used for financial reportingpurposes by $27,000. Mozart...
- Q Why is bank lending to large corporations more difficult thanmaking loans to small firms? What additional factors are involvedin this process? Do banks have some additional tools to help inassessing...
- Q A bond trader bought each of the following bonds at a yield tomaturity of 8 percent. Few weeks after the purchase of the bonds,interest rates fell to 7 percent. Maturity...
- Q what does it mean for financial market to be considered (a)informationally efficient and (b) economically efficient?
- Q You purchase 18 call option contracts with a strike price of$100 and a premium of $2.85. Assume the stock price at expirationis $112.00.a. What is your dollar profit? (Do notround...
- Q Roger is conducting a biochemical experiment for the next 12months. In the first month, the expenses are estimated to be$10,000. As the experiment progresses, the expenses areexpectedto increase by2 percent...
- Q Stock X has a 9.5% expected return, a beta coefficient of 0.8,and a 40% standard deviation of expected returns. Stock Y has a13.0% expected return, a beta coefficient of 1.3,...
- Q Your firm decides to increase equity by $1,000,000. Which of thefollowing sets of transactions could NOT be appropriate ledgerentries?Increase equity by $1,000,000 and increase long-term assets by$1,000,000Increase equity by $1,000,000,...
- Q Suppose you held a diversified portfolio consisting of a $7,500investment in each of 20 different common stocks. The portfolio'sbeta is 1.31. Now suppose you decided to sell one of the...
- Q (Presentvalue of an uneven stream ofpayments?)You are given three investment alternatives to analyze. The cashflows from these three investments are as? follows:InvestmentEnd of Year????A????B????C1?$3,000???$3,000?$6,000??2??4,000??3,0006,000??3??5,000??3,000(6,000)4??(6,000)3,000(6,000)5??6,000??5,000??16,000??What is the present value of each...
- Q Assume a firm has EBAT of $540,000, and no amortization. It isin a 30 percent tax bracket. a. Compute its cash flow. Cash flow $b. Assume it has $540,000 in...
- Q 1. The managers at Air León are reviewing data on sandwichpurchases on their flights to decide whether they should change theprice at which they sell sandwiches to their passengers flyingcoach....
- Q Describe a source of debt financing, and discuss when this typeof financing would be appropriate for a small business.
- Q You just received a bonus of $1,000.a. Calculate the future value of $1,000?, given that it will beheld in the bank for 5 years and earn an annual interest rate...
- Q Using the following information to answer the followingquestions?Both Bond A and Bond B have 8 percent coupons, make semiannualpayments, and are priced at par value. Bond A has 3 years...
- Q Fill in the blanks in the income statement and balance sheet andshow that Cash Flow Identity holds.If the company sold $300 worth of fixed assets, how much fixedassets were sold?Assuming...
- Q Given the following information. Percent of capital structure:Debt 10 % Preferred stock 5 Common equity 85 Additionalinformation: Bond coupon rate 13 % Bond yield 11 % Dividend,expected common $7.00 Dividend,...
- Q Donna Jamison was recently hired as a financial anaylst byComputeon Industries, a manufacturer of electronic components. Herfirst task was ri cinduct a financial analysis of the firm coveringthe last two...
- Q 1-What happens to the future value of some fixed dollar amountinvested today as the interest rate decreases? Why?2-What happens to the present value of some fixed dollar amountto be received...
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