Finance question and answers for September 10, 2023
- Q A company issues a $1,000 perpetual bond. The current rate is6%. Next period, the ratewill change to either 4% or 10%, with equal probability. Thebond is callable at the endof...
- Q How would a CFO decide if company should raise finance fromBond, OR Equity, OR Preferred Stock? Evaluate it by giving detailedfeatures, merits and demerits of the each of them.
- Q If you invest $22,267today at an interest rate of 9.98 percent, compounded daily, howmuch money will you have in your savings account in 21 years?
- Q Modern (MPT) and Post-Modern (PMPT) PortfolioTheory  Harry Markowitz (1952/1957/1959) developed Modern P ortfolioTheory (MPT). Graph the Expected Return on the Portfolio (E(r)p)vs. th e Portfolio Standard Deviation (Show). Show the Rf...
- Q RES 3200: ARMs and REFI1. A bank makes a 30 year Fully Amortizing FRM for $2,500,000 atan annual interest rate of 4.875% compounded monthly, with monthlypayments. What is the difference...
- Q What types of cycles predict an industry’s sensitivity to theeconomy?
- Q the following budgeted figures have been taken from the costrecords of MZ ltd:production units10 00012 500capacity level80%100%salesR1 144 000R1 430 000direct material @R5 per KGR200 000R250 000direct labour @R20 per...
- Q What type of risk does beta measure? Is this risk associatedwith the risk premium of an asset?
- Q Best Window & Door Corporation is considering theacquisition of Glassmakers Inc. Glassmakers has a capital structureconsisting of $5 million (market value) of 11% bonds and $10million (market value) of common...
- Q The following are the cash flows of two projects:YearProject AProject B0-290-2901170190217019031701904170If the opportunity cost of capital is 11%, what is theprofitability index for each project? (Do not roundintermediate calculations. Round...
- Q What are the estate tax consequences in the followingindependent cases involving commercial annuities? H and W aremarried. H purchased a joint and survivorship annuity for $500,000.When H died the present...
- Q 1)In general, what determines the market price of anyfinancial asset? What determines its intrinsic value? How are thetwo related in the absence of mispricing?2) Assuming a constant real return, why...
- Q Exercise 1-6 (Algo) Traditional and Contribution Format IncomeStatements [LO1-6]Cherokee Inc. is a merchandiser that provided the followinginformation:AmountNumber of units sold13,000Selling price per unit$17Variable selling expense per unit$1Variable administrative expense per...
- Q Lynn transfers property (basis of $225,000 and fair market valueof $300,000) to Condor Corporation in exchange for § 1244 stock.The transfer qualifies as a nontaxable exchange under § 351. In...
- Q Bellinger Industries is considering two projects for inclusionin its capital budget, and you have been asked to do the analysis.Both projects' after-tax cash flows are shown on the time linebelow....
- Q a). What is the market risk premium if the risk free rate is 5%and the expected market return is given as follows?State of natureProbabilityReturnBoom20%30%Average70%15%Recession10%5%b). A firm is evaluating two projects...
- Q discuss what are the characterstics of an effective team plese giveexamples
- Q What is the premium for a call option on a stock with thefollowing characteristics?Current stock price$70Stock price volatility (standard deviation)0.0693Continuously compounded annual risk free rate11.94%Strike price (or exercise price)$80Time to...
- Q A mining company is considering a new project. Because the minehas received a permit, the project would be legal; but it wouldcause significant harm to a nearby river. The firm...
- Q NPVYour division is considering two projects with the followingcash flows (in millions):0 1 2 3Project A-$17$8$8$3Project B-$26$13$10$9What are the projects' NPVs assuming the WACC is 5%? Round youranswer to two...
- Q A project has annual cash flows of $4,000 for the next 10 yearsand then $10,500 each year for the following 10 years. The IRR ofthis 20-year project is 13.08%. If...
- Q A company is analyzing two mutually exclusive projects, S and L,with the following cash flows:01234Project S-$1,000$880.19$250$15$10Project L-$1,000$10$240$420$792.65The company's WACC is 8.5%. What is the IRR of the betterproject? (Hint: The...
- Q Bellinger Industries is considering two projects for inclusionin its capital budget, and you have been asked to do the analysis.Both projects' after-tax cash flows are shown on the time linebelow....
- Q NPV PROFILES: TIMING DIFFERENCESAn oil-drilling company must choose between two mutuallyexclusive extraction projects, and each costs $11.8 million. UnderPlan A, all the oil would be extracted in 1 year, producing...
- Q Ifthe interest coverage ratio is too high, then the ROE is too low,Agree or Not ?What the three factor affect ROE and how higher ROE lead tohigher share price ?
- Q ZEN Inc. is financed by 3 millionshares of common stock and by $5 million face value of 8%convertible debt maturing in 2026. Each bond has a face value of$1,000 and...
- Q Project L costs $50,000, its expected cash inflows are $15,000per year for 11 years, and its WACC is 10%. What is the project'sNPV? Round your answer to the nearest cent....
- Q An electric utility is considering a new power plant in northernArizona. Power from the plant would be sold in the Phoenix area,where it is badly needed. Because the firm has...
- Q Bellinger Industries is considering two projects for inclusionin its capital budget, and you have been asked to do the analysis.Both projects' after-tax cash flows are shown on the time linebelow....
- Q Part AYou are thinking of purchasing a house. The house costs$350,000. You have $50,000 in cash that you can use as a downpayment on the house, but you need to...
- Q For the most recent fiscal year, book value of long-term debt atSchlumberger was $14969 million. The market value of this long-termdebt is approximately equal to its book value. Schlumberger’s shareprice...
- Q MGM CO. has been approached to bid on a contract to sell 500voice recognition(VR) computer keyboards per year for four years.Due to technological improvements, beyond that time they will beoutdated,...
- Q Consider fixed-for-fixed currency swap. Firm A is a U.S.-basedmultinational. Firm B is a U.K.-based multinational. Firm A wantsto finance a £2 million expansion in Great Britain. Firm B wants tofinance...
- Q Singal Inc. is preparing its cash budget. It expects to havesales of $30,000 in January, $35,000 in February, and $20,000 inMarch. If 20% of sales are for cash, 40% are...
- Q Consider a project to supply Detroit with 25,000 tons of machinescrews annually for automobile production. You will need an initial$4,500,000 investment in threading equipment to get the projectstarted; the project...
- Q Determine Grounds Keeper’s capital structure and workingcapital.Grounds Keeper Consolidated Balance Sheets (Dollars inthousands) 2012 2011 Assets Current assets: Cash and cashequivalents 78,240 44,395 Receivables 399,891 340,062 Inventories844,737 736,677 Total current...
- Q Consider a project to supply Detroit with 27,000 tons of machinescrews annually for automobile production. You will need an initial$6,000,000 investment in threading equipment to get the projectstarted; the project...
- Q If Grounds Keeper has a required rate of return on its long-termdebt of 9% (before taxes) and a required rate of return on itscommon stock (of 16%?, {not positive this...
- Q MGM Co. had decided to sell a new line of golf clubs. The clubswill sell for $850 per set and have a variable cost of $400 perset. The company has...
- Q principles of corporate finance chapter 91. Suppose a firm uses its company cost of capital to evaluateall projects. Will it underestimate or overestimate the value ofhigh-risk projects?2. A company is...
- Q MGM Co. has been approached to bid on a contract to sell 5,000voice recognition (VR) computer keyboards per year for four years.Due to technological improvements, beyond that time they will...
- Q Aasir can invest his money in risk-free asset and/or in afund F. The risk-free asset provides a guaranteed return of 4%. Thefund F provides expected return of 12% withvolatility of...
- Q Rentz Corporation is investigating the optimal level of currentassets for the coming year. Management expects sales to increase toapproximately $2 million as a result of an asset expansionpresently being undertaken....
- Q Williams & Sons last year reported sales of $37 million,cost of goods sold (COGS) of $30 and an inventory turnover ratio of2. The company is now adopting a new inventory...
- Q Amounts are in thousands of dollars (except number of sharesand price per share:Kiwi Fruit Company Balance Sheet  Cash and equivalents$570  Operating assets650  Property, plant, and equipment2,700  Other assets110  Total assets$4,030  Current liabilities920  Long-term debt1,280  Other liabilities120  Total liabilities$2,320  Paid in...
- Q You are a consultant to a large manufacturing corporation thatis considering a project with the following net after-tax cashflows (in millions of dollars):Years from NowAfter-Tax Cash Flow0–401–1014The project's beta is...
- Q Consider the following cash flows on two mutually exclusiveprojects for the Bahamas Recreation Corporation (BRC). Bothprojects require an annual return of 16 percent.  YearDeepwater FishingNew Submarine Ride0−$985,000−$1,920,0001405,000970,0002538,000835,0003455,000820,000  a-1.Compute the IRR for both...
- Q YEAR MACRS 3-YEAR133%245%315%47%Troll Inc is considering replacing an old, relativelyinefficient Troll onjection-mold machine that was purchased threeyears ago with a new, more effiecent model. The cost of the oldmachine has...
- Q Finance:You pick out a new carand the dealer is offering 0% interest for 60 months or a $2,500cash-back bonus. Your negotiated price is $16,000. Your creditunion is currently offering a...
- Q Snider Industries sells on terms of 3/10, net 45. Total salesfor the year are $520,000. Thirty percent of customers pay on the10th day and take discounts; the other 70% pay,...
- Q The Bruin's Den Outdoor Gear is considering a new 6-year projectto produce a new tent line. The equipment necessary would cost$1.35 million and be depreciated using straight-line depreciationto a book...
- Q Choose one derivative product: credit default swap, interestrate swap, currency swap, forwards, futures or any other derivativesecurity you found interesting.definition of the instrument, simple explanation how theinstrument works, as well...
- Q Â Â How does behavioral finance explain the real worldinconsistencies of the efficient markets hypothesis(EMH)?
- Q Depreciation and accounting cash flow   A firmin the third year of depreciating its only​ asset,which originallycost $175,000and has a​ 5-yearMACRS recovery periodRounded Depreciation Percentages by Recovery Year UsingMACRS forFirst Four Property...
- Q Finding operating and free cash flows   Consider the balancesheets and selected data from the income statement of KeithCorporation that followKeith Corporation Balance SheetsAssets20192018Cash$1,500$1,000Marketable securities18001200Accounts receivable20001800Inventories29002800Total current assets$8,200$6,800Gross fixed assets$29,500$28,100Less: Accumulated...
- Q Upton Computers makes bulk purchases of small computers, stocksthem in conveniently located warehouses, ships them to its chain ofretail stores, and has a staff to advise customers and help themset...
- Q Looking for a response to the following statement:There are four forms of business organizations: soleproprietorships, partnerships, limited liability companies, andcorporations. Proprietorships are easy to form, subject to very fewregulations and...
- Q Pro forma income statement   The marketing department ofMetroline Manufacturing estimates that its sales in 2020 will be$1.53 million. Interest expense is expected to remain unchanged at$34,000, and the firm plans to...
- Q what is the benefit of implementing a global accountstrategy?
- Q Â Â What is a market? In a short answer differentiatebetween the following types of markets: physical asset marketsversus financial asset markets, spot markets versus futuresmarkets, money markets versus capital markets,...
- Q You are the director of operations for your company, andyour vice president wants to expand production by adding new andmore expensive fabrication machines. You are directed to build abusiness case...
- Q I am having some difficulties finding the IRR and NPV, and thediscounted payback period of a Capital project for Intel that willlast 12 yrs:Project Cost; 10% of PPE : 4,897,600Annual...
- Q Describe how financial intermediation and financial innovationaffect banking.
- Q You are the director of operations for your company, andyour vice president wants to expand production by adding new andmore expensive fabrication machines. You are directed to build abusiness case...
- Q Consider a project of ABC Ltd with the followingcharacteristics:Cash inflows: $500,000 per year for the indefinite future; Cashcosts: 72% of sales;Initial investment: $475,000;Corporate tax: 34%;The cost of capital for a...
- Q You have been given the following return information for amutual fund, the market index, and the risk-free rate. You alsoknow that the return correlation between the fund and the market...
- Q Part B: New LocationRhonda has found a location for the next store she plans toopen. The store front will require $30,000 in renovations before itis ready to open. She would...
- Q Part A: New EquipmentRhonda is debating about buying a new ice cream machine for oneof her stores. The current machine is valued at $10,000 this yearand will generate $2,500 of...
- Q Calculate the following time value of moneyproblems:If you want to accumulate $500,000 in 20 years, how much do youneed to deposit today that pays an interest rate of 15%?What is...
- Q Polecat plc has 18 million $0.50 ordinary shares in issue. Thecurrent stock market
value of these is $1.70 per share. Thedirectors have decided to make a one-for-three
rights issue at$1.25 each. Julie...
- Q FastTrack​ Bikes, Inc. is thinking of developing a new compositeroad bike. The development will take six years and the cost is $188000 per year. Once in​ production, the bike is...
- Q Question 1-- NPV Profiles: Graph the NPVprofiles for both projects on a common chart., making sure youidentify the \"crucial\" points.0 -$725 -$8501 100 2002 250 2003 250 2004 200 2005...
- Q Why might providers needing to bear financial risk invalue-based payment models lead to more mergers among providerorganizations?
- Q Elliot Karlin is a​ 35-year-old bank executive who has justinherited a large sum of money. Having spent several years in the​bank's investments​ department, he's well aware of the concept ofduration...
- Q 5. QRS Bank is charging a 12 percent interest rate on a$5,000,000 loan. The bank also charged $100,000 in fees tooriginate the loan. The bank has a cost of funds...
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