Finance question and answers for July 01, 2023
- Q ?(NPV with varying required rates of return?) Big? Steve's, amaker of swizzle? sticks, is considering the purchase of a newplastic stamping machine. This investment requires an initialoutlay of ?$150,000 and...
- 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 DO YOU THINK YOU HAVE THE CHARACTERISTICS TO BE A SUCCESSFULSMALL BUSINESS OWNER-COMPARE AND CONTRAST.Interview 0ne or two business owners. Ask them to describe thecharacteristics they think are necessary for...
- Q McConnell Corporation has bonds on the market with 17 years tomaturity, a YTM of 10.0 percent, a par value of $1,000, and acurrent price of $1,196.50. The bonds make semiannual...
- Q Find the duration of a 6% coupon bond making annual couponpayments if it has three years until maturity and a yield tomaturity of 10%.
- Q The Sunbelt Corporation has $35 million of bonds outstandingthat were issued at a coupon rate of 11.275 percent seven yearsago. Interest rates have fallen to 10.75 percent. Mr. Heath, theVice-President...
- Q 1. Your company is considering purchasing a new system thatcosts $200,500. This cost will be depreciated straight-line to zeroover the project's five-year life, at the end of which the systemis...
- Q Expected ReturnStandard DeviationPortfolio A12%20%Portfolio B6%12%T-bill3%0%You are an investment adviser and you have the three investmentsabove to recommend to your clients. The correlation between A and Bis -0.5.Solve for the optimal...
- Q You are considering expanding your product line that currentlyconsists of skateboards to include gas-powered skateboards, and youfeel you can sell 12000 of these per year for 10 years (after whichtime...
- Q DISCUSS QUESTION #3 (Refer to Handouts for Chapter 11 posted inContent)The following TWO projects are being considered in this year'scapital budget.PROJECT 1: Assume the Cost of Capital is 10% for...
- Q AFN equationBroussard Skateboard's sales are expected to increase by 20%from $7.6 million in 2016 to $9.12 million in 2017. Its assetstotaled $5 million at the end of 2016. Broussard is...
- Q Turner Video will invest $96,500 in a project. Thefirm cost of capital is 11%. the investment will provide thefollowing inflows.year. inflows1. $340002. 360003. 310004. 390005. 4300The Internal rate of return is 12%A. if the reinvestment assumption...
- Q Ace Movers is thinking about buying a truck. In the first yearit expects to earn $9,000 and then during the second year it willbe retro-fitted so it can burn natural...
- Q Gasworks, Inc., hasbeen approached to sell up to 3.4 million gallons of gasoline inthree months at a price of $2.80 per gallon. Gasoline is currentlyselling on the wholesale market at...
- Q Global Pistons? (GP) has common stock with a market value of $400 million and debt with a value of $ 206 million. Investorsexpect a 14 % return on the stock...
- Q Barnes Air Conditioning Inc. has two classes of preferred stock:floating rate preferred stock and straight (normal) preferredstock. Both issues have a par value of $100. The floating-ratepreferred stock pays an...
- Q A global equity manager is assigned to select stocks from auniverse of large stocks throughout the world. The manager will beevaluated by comparing her returns to the return on the...
- Q Katy owns a portfolio that consists of four stocks asfollows:StockNo. of sharesPrice per shareBetaA150$15.000.50B200$25.001.20C300$19.001.45D100$35.002.00If the S&P 500 return is expected to be 7.5%, and theT-bills yield 2%, what return should...
- Q Using the dividend growth model, explain why a firm would behesitant to reduce the growth rate of its dividends.
- Q Evaluate the extent to which a firm’s operating exposure can behedged. (35 MARKS for this question)
- Q You are considering a project that has been assigned a discountrate of 8 percent. If you start the project today (t=0), you willincur an initial cost of $980 and will...
- Q Consider a firm that has fixed costs of 8M. Its sales are 30Mand the variable costs are 50% of sales. The firm uses both debtand equity and has an interest...
- Q Dickinson Brothers, Inc., is considering investing in a machineto produce computer keyboards. The price of the machine will be$1,600,000, and its economic life is five years. The machine willbe fully...
- Q 1.) What is the depreciation expense in Year 1 (in $s) and aftertax OCF in year 1?2.) What is the depreciation expense in Year 2 (in $s) and aftertax OCF...
- Q What is a payday loan? Give us an example of the terms of apayday loan? What explains why the interest rate on such loans sohigh? What is your personal opinion...
- Q Copy of Given the following information and options, calculatethe optimal life of the project. Assume the cost of capital is 10%p.a. Maximum life is five years and replacement of like...
- Q A company recently hired you as a consultant to estimate thecompany’s WACC. You have obtained the following information. (1)The firm's noncallable bonds mature in 20 years, have an 8.00%annual coupon,...
- Q Using the following data: (Pleae prove answers in excelspreadship & show calculations)• Initial Investment = $10,000,000• Cash Inflow – Year 1 = $3,000,000• Cash Inflow – Year 2 = $3,500,000•...
- Q Suppose that the current 1-year rate (1-year spot rate) andexpected 1-year T-bill rates over the following three years (i.e.,years 2, 3, and 4, respectively) are as follows: 1R1 =1%, E(2r1) =...
- Q MVP, Inc., has produced rodeo supplies for over 20 years. Thecompany currently has a debt-equity ratio of 45 percent and the taxrate is 23 percent. The required return on the...
- Q Objective: Students demonstrate ability to1. Utilize several capital budgetingconcepts.2. Complete required calculations.3. Develop a written recommendation to senior management based onresulting data.Scenario: D & H Enterprises is considering building a...
- Q Barfly Inc. manufactures and markets a line of non-alcoholicmixers sold to restaurants and bars. Barfly’s Creative Bartenderhas recently experimented with making alcoholic versions with theintention of bottling and marketing these...
- Q Assume that security returns are generated by the single-indexmodel,Ri = ?i +?iRM + eiwhere Ri is the excess return for securityi and RM is the market’s excessreturn. The risk-free rate...
- Q Discuss the advantages and disadvantages of Net Present Value,Internal Rate of Return, & the Payback Method. Is one betterthan the others?
- Q Consider the following multifactor (APT) model of securityreturns for a particular stock.FactorFactor BetaFactor Risk PremiumInflation1.010%Industrial production0.412%Oil prices0.28%a. If T-bills currently offer a 5% yield, findthe expected rate of return on...
- 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 FIN 3113 Food Truck Project Cash Flow Mini CaseRecently, Austin Hansen was laid off from his job of 25 years.He and his wife, Anne, decidedto purchase and operate a food...
- Q The current stock price for a company is $43 per share, andthere are 7 million shares outstanding. The beta for this firmsstock is 1.1, the risk-free rate is 4.8, and...
- Q true or false?1. All annuity contracts have a feature that protects theannuitant from inflation.2. Variable annuities are a riskier investment than fixedannuities.3. The goal of most annuities is to provide...
- Q You must evaluate the purchase of a proposed spectrometer forthe R&D department. The base price is $80,000, and it wouldcost another $20,000 to modify the equipment for special use by...
- Q Below are returns on the stock A and S&P500 index. Allnumbers are in decimals (-0.0222 is equivalent to -2.22%).AS_P500-0.02220.0032-0.0048-0.00580.13330.04340.07650.1081-0.0161-0.01210.12500.14000.01450.0368-0.0475-0.04540.04300.0577-0.0260-0.13740.00710.00640.02490.01860.08500.0215-0.0624-0.07520.09330.03650.04560.0528-0.0632-0.01310.04500.00090.02000.00170.02800.0985What is the sample standard deviation of the stock Areturns?Please write an...
- Q Consider the two (excess return) index-model regression resultsfor stocks A and B. The risk-free rate over theperiod was 6%, and the market’s average return was 15%. Performanceis measured using an...
- 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 You are considering adding a new item to your company’s line ofproducts. The machine required to manufacture the item costs$600,000. The shipping costs are $2,000 and the installation costsare $28,000....
- Q Suppose that there are two independent economic factors,F1 and F2. The risk-freerate is 6%, and all stocks have independent firm-specificcomponents with a standard deviation of 46%. Portfolios Aand Bare both...
- 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 2. Net present value (NPV)The capital budgeting process is comprehensive and is based oncertain assumptions, models, and benchmarks. This process oftenbegins with a project analysis. Generally, the first step in...
- Q Consider the following two mutually exclusive projects: YearCash Flow (A)Cash Flow (B)0–$261,339 –$15,269 125,300 4,848 252,000 8,223 354,000 13,542 4406,000 9,270 Whichever project you choose, if any, you require a 6...
- Q Dorman Industries has a new project available that requires aninitial investment of $6.5 million. The project will provideunlevered cash flows of $875,000 per year for the next 20 years.The company...
- Q Given the following information: Year 1 free cash flow: 40million Year 2 free cash flow 90 million Year 3 free cash flow 100million After year 3, expected FCF growth is...
- Q Consider the following table:Stock FundBond FundScenarioProbabilityRate of ReturnRate of ReturnSevere recession0.10–37%–9%Mild recession0.20–11%15%Normal growth0.3514%8%Boom0.3530%–5%a. Calculate the values of mean return andvariance for the stock fund. (Do not round intermediatecalculations. Round "Mean...
- Q DuPont identity.??For the firms in the popup? window, find thereturn on equity using the three components of the DuPont?identity: operating? efficiency, as measured by the profit margin?(net income/sales); asset management?...
- Q Imagine that you are holding 5,400 shares of stock, currentlyselling at $45 per share. You are ready to sell the shares butwould prefer to put off the sale until next...
- Q what are the empirical evidence that supports or refutes theEfficient Market Hypothesis?need details thanks
- Q (Equivalent annual cost? calculation)??The TempletonManufacturing and Distribution Company of? Tacoma, Washington, iscontemplating the purchase of a new conveyor belt system for one ofits regional distribution facilities. Both alternatives willaccomplish the...
- Q (Calculating project cash flows and? NPV)??Raymobile Motors isconsidering the purchase of a new production machine for$350,000.The purchase of this machine will result in an increasein earnings before interest and taxes...
- Q Nonconstant growth valuationHolt Enterprises recently paid a dividend, D0, of$2.00. It expects to have nonconstant growth of 13% for 2 yearsfollowed by a constant rate of 6% thereafter. The firm's...
- Q Paul is celebrating his 43rd birthday today and is planning fora retirement savings programe forhis family.[Planned expenses]- Paul’s daughter is now 6 years old and he plans to send her...
- Q Caspian Sea Drinks is considering the purchase of a plum juicer– the PJX5. There is no planned increase in production. The PJX5will reduce costs by squeezing more juice from each...
- Q The following table contains prices and dividends for a stock.All prices are after the dividend has been paid. If you bought thestock on January 1 and sold it on December?...
- Q Oil Drilling Inc. is considering Projects S and L, whose cashflows are shown below. These projects are mutually exclusive,equally risky, and not repeatable. The CEO believes the IRR is thebest...
- Q •You are looking at a new project and you have estimated thefollowing cash flows:Year 0: CF = -$150,000Year 1-2: CF = $80,000Year 3-4: CF = $50,000Year 5-6: CF = $30,000Year...
- Q Kolby Corp. is comparing two different capital structures. PlanI would result in 12,000 shares of stock and $100,000 in debt. PlanII would result in 7,200 shares of stock and $160,000...
- Q Stock X has a 10% expected return, a Beta coefficient of .9,and a 35% standard deviation of expected return. Stock Y has a12.5% expected return, a bet coefficient of 2,...
- Q Smirnoff & Co is facing a rapid growth in earnings anddividends. Management projects that dividends will grow at a rateof 12% during year 1, 10% during year 2, and 8%...
- Q The director for S Corp. manufacturers of playground equipment,is considering a plan to expand production facilities in order tomeet an increase in demand. He estimates that this expansion willproduce a...
- Q Quad Enterprises is considering a new three-year expansionproject that requires an initial fixed asset investment of $2.37million. The fixed asset will be depreciated straight-line to zeroover its three-year tax life....
- Q Exhibit 10.1Assume that you have been hired as a consultant by CGT, a majorproducer of chemicals and plastics, including plastic grocery bags,styrofoam cups, and fertilizers, to estimate the firm's weightedaverage...
- Q Blake’s college does not currently have an investment club oncampus. Blake would like to establish an investment club to learnmore about buying and sellling stocks. He also wants to help...
- Q Dog Up! Franks islooking at a new sausage system with an installed cost of $455,000.This cost will be depreciated straight-line to zero over theproject’s five-year life, at the end of...
- Q If you were an entrepreneur, how would you think of thedifference between a preferred-plus-cheap common structure and aconvertible preferred structure?
- Q 6. A call option on a non-dividend-paying stock has a marketprice of $2.50. The stock price is $15, the exercise price is $13,the time to maturity is three months, and...
- Q Calculate the price of a three-month European put option ona non-dividend-paying stock with a strike price of $50 when thecurrent stock price is $50, the risk-free interest rate is 10%...
- Q You are the chief fiscal officer for a municipalityand have been directed by the mayor's office to lead government ofa writing debt policy statement. You are aware of the risksborrowings...
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