Finance question and answers for August 19, 2023
- Q Broussard Skateboard's sales are expected to increase by 20%from $9.0 million in 2016 to $10.80 million in 2017. Its assetstotaled $5 million at the end of 2016. Broussard is already...
- Q You want to buy a car for cash 5 years from now. The car priceat that time will be 20000 dollars. To this end you want to make anannuity deposit...
- Q Ifyou want to be a millionaire when you retire in 50 years, how muchmust you save each month if you can earn a 6% annual rate ofreturn?what is the effective...
- Q Consider the following? bonds:BondCoupon Rate ?(annual payments)Maturity ?(years)A0.00.0?%1515B0.00.0?%1010C4.24.2?%1515D7.77.7?%1010What is the percentage change in the price of each bond if itsyield to maturity falls from6.8 %6.8%to5.8 %5.8%??The percentage change in the...
- Q The Mayflower Corporation has two different bonds currentlyoutstanding. Bond A has a face value of $50,000 and matures in 5years. The bond makes no payments for the first 2 years,...
- Q A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money...
- Q A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money...
- Q The Morris Corporation has $800,000 of debt outstanding, and itpays an interest rate of 10% annually. Morris's annual sales are $4million, its average tax rate is 30%, and its net...
- Q Angel Enterprise was going public in2018. You were wondering whether the $30 per share offer price is afair price. You decided to use discounted cash flow approach tovalue the company’s...
- Q endy's boss wants to use straight-line depreciation for the newexpansion project because he said it will give higher net income inearlier years and give him a larger bonus. The project...
- Q Suppose that a 15-year mortgage loan for $200,000 is obtained.The mortgage is a level-payment, fixed-rate, fully amortizedmortgage and the mortgage rate is 7.0% (APR, monthly).a. Find the monthly mortgage payment.b....
- Q Below are the financial statements of ABC Company20182017cash120,00044,000accounts receivable100,00090,000inventory220,000242,000equipment220,000120,000a/d equipment80,00060,000land820,0001,020,000total assets1,340,0001,396,000accts payable220,000180,000common stock220,000200,000r/e900,0001,016,000Income statementsales420,000cogs180,000operexpenses80,000depreciation exp40,000loss onsale land100,000income 100,000Further informationa) ABCsold some stock during the yearb) ABConly had 1 transaction dealing with...
- Q Even though most corporate bonds in the United States makecoupon payments semiannually, bonds issued elsewhere often haveannual coupon payments. Suppose a German company issues a bond witha par value of...
- Q Robert Taylor, 50 years old and a U.S. resident, recentlyretired and received a$500,000 cash payment from his employer as an early retirementincentive. He alsoobtained $700,000 by exercising his company stock...
- Q An all-equity firm with 200,000 shares outstanding, AntwertherInc., has $2,000,000 of EBIT, which is expected to remain constantin the future. The company pays out all of its earnings, soearnings per...
- Q 4.XYZ Corporation issued 10-year bonds a year ago at a coupon rateof 10 percent. The ?bonds make semiannual payments. If the YTM onthese bonds is 7 percent, what is ?the...
- Q what is asset transformerasset transformer Not asset transformation?)
- Q You graduate from College at 21. For your retirement, you decideto invest into a Fidelity mutual fund that gives you a 7.5% APRcompounding monthly. After some years of work, you...
- Q 1. Why is it significant for companies to recognize and addressthe priorities and needs of different stakeholder groups?2. Name another company in the Healthcare industry that providesbenefits to multiple stakeholders,...
- Q In 200 words describe Home Budgeting vs Business Budgeting
- Q A General Power bond carries a coupon rate of 9.2%, has 9 yearsuntil maturity, and sells at a yield to maturity of 8.2%. (Assumeannual interest payments.)a. What interest payments do...
- Q PORTFOLIO REQUIRED RETURNSuppose you are the money manager of a $4.78 million investmentfund. The fund consists of four stocks with the followinginvestments and betas:StockInvestmentBetaA$ 500,000 1.50B420,000 (0.50)C1,460,000 1.25D2,400,000 0.75If the market's required rate of return...
- Q THESUBPRIME MORTGAGE MARKET MELTDOWNquestion) Should the borrowers (homeowners) share in the blame? Ifso, how?
- Q List and describe two concepts that you feel were most importantto you in this course. Why were these important to you?
- Q Respond to you thoughts on this discussion in 150words Calculators, computers, and a number of other technologicalinnovations are important tools for doing mathematics. How wellteachers use the tools greatly affects how...
- Q Pearl Corp. is expected to have an EBIT of $3,300,000 next year.Depreciation, the increase in net working capital, and capitalspending are expected to be $160,000, $150,000, and $190,000,respectively. All are...
- Q Buckeye Industries has a bond issue with a face value of $1,000that is coming due in one year. The value of the company’s assetsis currently $1,140. Urban Meyer, the CEO,...
- Q Compare and contrast options and forward contracts.
- Q Campbell, Inc., has a $1,000 face value convertible bond issuethat is currently selling in the market for $990. Each bond isexchangeable at any time for 24 shares of the company’s...
- Q 18. What proportion of values in a normal distribution will beabove 2.33 standard deviations to the right of (or above) themean?
- Q Consider the following project of Hand Clapper, Inc. The companyis considering a four-year project to manufacture clap-commandgarage door openers. This project requires an initial investment of$12.8 million that will be...
- Q Consider the following two mutually exclusive projects:YearCash Flow(X)Cash Flow(Y)0–$20,900–$20,90019,07510,55029,5508,02539,0258,925A) Calculate the IRR for each projectB)What is the crossover rate for these two projects?C) What is the NPV of Projects X...
- Q Some recent financial statements for Smolira Golf Corp.follow. SMOLIRA GOLF CORP.2017 and 2018 Balance SheetsAssetsLiabilities and Owners’ Equity2017201820172018 Current assets Current liabilities Cash$36,285$39,584 Accounts payable$40,132$43,532 Accounts receivable18,75129,476 Notes payable20,90817,625 Inventory4,18043,392 Other21,57426,154 Total$59,216$112,452 Total$82,614$87,311 Long-term debt$124,500$193,150 Owners’ equity Common stock and paid-insurplus$56,900$56,900 Accumulated retainedearnings261,592297,574 Fixed assets Net plant...
- Q Assume that the following market model adequately describes thereturn generating behavior of risky assets: Rit=?i+?iRMt+?itRit=?i?+?iRMt+?it Here: Rit = The return on the ith asset at Timet.RMt = The return on a portfolio containing...
- Q If I had a software company, what would be a hazard risk onethat I can cover with a common business commercial package policy ?How would I use a decision tree...
- Q ?(IRR calculation?) Determine the IRR on the following?projects:a. An initial outlay of ?$9,000 resulting in a single free cashflow of ?$17,118 after 7 years____%b. An initial outlay of ?$9,000 resulting...
- Q ?(Payback ?period, NPV,? PI, and IRR calculations?) You areconsidering a project with an initial cash outlay of ?$80,000 andexpected free cash flows of ?$24,000 at the end of each year...
- Q A mutual fund holds $2.8million worth of assets and 560,000number of shares issued at the beginning of the year. The mutualfund has 1.2% operating expenses and 0.5% 12b-1 fees. Expenses...
- Q Exhibit 5MonthMarketAsset RAsset S13%–5%4%2–5%-6%3%31%–4%4%4–7%8%3%56%–9%4%Use Exhibit 5. The data gives the historicreturn over the past five months for the market portfolio and twoassets: R and S. Which of the answers below...
- Q Pearl Corp. is expected to have an EBIT of $3,300,000 next year.Depreciation, the increase in net working capital, and capitalspending are expected to be $160,000, $150,000, and $190,000,respectively. All are...
- Q Please show full work if possible, would like to be able tounderstand the problem and solution.Leo company is considering a new venture in office equipment. Itexpects the cost ofacquisition of...
- Q 9. A 5.50 percent coupon bond with 14 years left to maturity ispriced to offer a 5.20 percent yield to maturity.You believe that in one year, the yield to maturity...
- Q Companies invest in expansion projects with the expectation ofincreasing the earnings of its business.Consider the case of Garida Co.:Garida Co. is considering an investment that will have thefollowing sales, variable...
- Q Refunding Analysis Mullet Technologies is considering whether ornot to refund a $125 million, 13% coupon, 30-year bond issue thatwas sold 5 years ago. It is amortizing $6 million of flotationcosts...
- Q What are the advantages and disadvantages of the PrimaryMarket?Please list at least 10 advantages and disadvantages.
- Q Sandra would like to organize BAL as either an LLC (taxed as asole proprietorship) or a C corporation. In either form, the entityis expected to generate an 14 percent annual...
- Q 3. Asset management ratiosAsset management ratios are used to measure how effectively afirm manages its assets.Remember, there are two slightly different equations that can beused to evaluate the management of...
- Q 1. Net present value (NPV)Evaluating cash flows with the NPV methodThe net present value (NPV) rule is considered one of the mostcommon and preferred criteria that generally lead to goodinvestment...
- Q An investor owns a lot that is suitable for either six or ninecondominium units. The per unit construction costs of the buildingare $80,000 with six units and $90,000 with nine...
- Q Five investment alternatives have the following returns andstandard deviations of returns. AlternativesReturns:Expected ValueStandardDeviationA$1,110$1,270B3,970820C3,9701,330D5,7902,650E12,5007,350 Calculate the coefficient of variation and rank the fivealternatives from lowest risk to the highest risk by using thecoefficient...
- Q 1. ABC and XYZ are identical firms in all respects except fortheir capital structure. ABC is all equity financed with $800,000in stock. XYZ uses both stock and perpetual debt; its...
- Q Consider a project to produce solar water heaters. It requires a$10 million investment and offers a level after-tax cash flow of$1.56 million per year for 10 years. The opportunity cost...
- Q Jiminy’s Cricket Farm issued a bond with 30 years to maturityand a semiannual coupon rate of 7 percent 5 years ago. The bondcurrently sells for 95 percent of its face...
- Q 1. Green desires to form a new company to manufacture lawnmowers. Green is concerned about having his personal assets exposedto liability for the new company’s contracts and torts.Furthermore, he wants...
- Q A stock sells for $110. A call option on the stock has exerciseprice of $105 and expires in 43 days. Assume that the interest rateis 0.11 and the standard deviation...
- Q Yeatman Co. is considering an investment that will have thefollowing sales, variable costs, and fixed operating costs:Year 1Year 2Year 3Year 4Unit sales4,8005,1005,0005,120Sales price$22.33$23.45$23.85$24.45Variable cost per unit$9.45$10.85$11.95$12.00Fixed operating costs$32,500$33,450$34,950$34,875This project will...
- Q Suppose the current stock price (P0) is US$45. A one year calloption on the stock with an exercise price € of US$35. A calloption was brought which will expire in...
- Q 2. Rowan Roadworks is considering the purchase of a new $124,500road grader. Rowan expects the cash inflows to be $18,500 for thefirst three years, $15,000 for the following four years...
- Q A firm is considering the following two competingproposals for the purchase of new equipment.Assume straight-line depreciation and a tax rate of 20percent.(a) Calculate the net present value of each alternativeat...
- Q Many countries have a very similar set up of central banksresponsibilities such as Financial Market Stability, MonetaryPolicy and issuing currency. The central authority of the Tanzaniamoney and banking system is...
- Q Discuss the assumptions of the dividend discount model (DDM) andthe information needed to conduct equity valuation using the DDM.Give one alternative method of valuation from your text that can beused...
- Q Mr. Sam Golff desires to invest a portion of his assets inrental property. He has narrowed his choices down to two apartmentcomplexes, Palmer Heights and Crenshaw Village. After conferringwith the...
- Q Kyle’s Shoe Stores Inc. is considering opening an additionalsuburban outlet. An aftertax expected cash flow of $120 per week isanticipated from two stores that are being evaluated. Both storeshave positive...
- Q 11. What is the internal rate of return for a project thatrequires a current cash outlay of $14,975 and is expected togenerate cash inflows of $4,000 at the end of...
- Q Suppose you plan to retire in 40 years. If you make 10 annualinvestments of $ 1,000 into your retirement account for the first10 years, and no more contributions to the...
- Q Hooper Chemical Company, a major chemical firm that uses suchraw materials as carbon and petroleum as part of its productionprocess, is examining a plastics firm to add to its operations.Before...
- Q Suppose you are going to receive $ 35,000 per year for 18 yearsat the beginning of each year. Compute the present value of thecash flows if the appropriate interest rate...
- Q Dixie Dynamite Company is evaluating two methods of blowing upold buildings for commercial purposes over the next five years.Method one (implosion) is relatively low in risk for this businessand will...
- Q John and Daphne are saving for their daughter Ellen's collegeeducation. Ellen just turned 10 at (t = 0), and she will beentering college 8 years from now (at t =...
- Q Your bank offers a savings account that pays a stated (nominal)interest rate of 10 percent per year, compoundedsemiannually. Requirement 1:If you deposit $15,000 today into this account and leave itinvested for...
- Q A firm is evaluating the purchase of new machinery that requiresan initial investment of $10,000. The cash flows that will resultfrom this investment are presently valued at $11,500. The netpresent...
- Q A machine costs $10,000 and has a discount rate of 7.5%.Calculate the profitability index of the project if the net presentvalue of cash inflows is $4,600 in year 1, $3,400...
- Q 5. The price of a stock is $40. The price of a one-year Europeanput option on the stock with a strike price of $30 is quoted as $7and the price...
- Q Time Cash flow0 -165,0001 56,5002 67,4003 45,6004 29,8005 7,500Suppose your firm is considering investing in Project K with thecash flows shown in the table. Assume that...
- Q The Titanic Shipbuilding Company has a noncancelable contract tobuild a small cargo vessel. Construction involves a cash outlay of$268,000 at the end of each of the next two years. At...
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