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Financial Pre-Test Problems

I am looking for the way to solve these by hand and in Excel, and also the proper answer: 1. Suppose that the following cash flows are received: 0 = -$500, 1 = $200, 2 = $200, 3 = $200 The Internal Rate of Return on the cash flows (rounded to the nearest percent) is 8%, 9%, 10%, 11%, or 12% 2. A 10-year bond payin

Production Possiblity Frontier

St Atanagio is a remote island in the Atlantic. The inhabitants grow corn and breed poultry. The accompanying table shows the maximum annual output combinations of corn and poultry that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for corn production, the

Pecking-Order and Trade-off Theories

Several theories are proposed to explain how companies deal with debt and financial distress. QUESTIONS: 1. Compare and contrast trade-off theory and pecking-order theory. 2. Describe a specific business that seems to follow trade-off theory and another that follows pecking-order theory. 3. Why would these theories b

Break-Even & Sensitivity Analysis

We are evaluating a project that costs $750,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 159,000 units per year. Price per unit is $41, variable cost per unit is $28, and fixed costs are $753,000 per year. The tax rat

Differences between Operating and Financial Leverage

Please help with the following problem regarding the differences between operating and financial leverage. Provide at least 200 words and include references in the solution. Compare operating and financial leverage. How do they differ? What are risks of having excessive financial leverage? Explain the term degree of total

Solve: For the Expected Return

Please see the attached word document to view the expected return problems. Any assistance would be appreciated. Consider the following information: Rate of Return If State Occurs State of Probability of ________________________________________ Economy State of Economy Stock A Stock B Recession 0.17

Returns and Variability

1. Returns: Suppose you bought a 6 percent coupon bond one year ago for $1040. The bond sells for 1,063 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? b. What was your total nominal rate of return on this investment over the past Year? c. If the inflation

Straight Line Method and Bond Terminology

Straight-Line Method E9. DNA Corporation issued $4,000,000 in 8 percent, 10-year bonds on February 1, 2010, at 115. Semiannual interest payment dates are January 31 and July 31. Use the straight-line method and ignore year-end accruals. Bond Terminology P2. Listed below are common terms associated with bonds: a. Bond cer

The Importance of Merger and Acquisition

Hi, I am looking for assistance with the following questions: 1. Apple Inc. is one of the best-known global technology companies. Who are Apple's primary customers? Current and potential competitors? Suppliers? How would you assess Apple's bargaining power with respect to its customers and suppliers? What are Apple's strengt

Financial Management: Component Costs of Capital/WACC

In the attached document is the Acme Manufacturing Company's abbreviated Balance Sheet for the current fiscal year. In addition, data is listed for three projects that management is evaluating for possible acceptance for this year. 1. What are the component costs of capital for Acme's existing capital? (For the common stock

Capital Budget Issues

See the attached file. 1) A corporation has the following balances sheet liabilities Current Liabilities $2,000 Long term debt $5,000 Prefered stock $2,000 Common stock $8,000 Retained earnings $3,000 $20,000 Currently, the riskless interest

Mergers, Acquisitions and Net Present Value

Think about the Textron Company and the possibility of it merging with Boeing Company. Write a two to three page paper answering the following questions: 1) If you were to pick one company (Boeing) for your SLP company (Textron) to merge with. Explain your choice with respect to possible benefits of this merger and why you wo

Debt Financing Questions

29. Bond valuation. Currently, Boston Common Community Hospital's tax-exempt bond is selling for $626.53 per bond and has a remaining maturity of twenty years. If the par value is $1,000 and the coupon rate is 7 percent, what is the yield to maturity? 30. Loan amortization. Land Hope Hospital needs to borrow $1,000,000 to pur

Find the market value of a bond in the given cases.

Bond valuation A tax-exempt bond was recently issued at an annual 12 percent coupon rate and matures 20 years from today. The par value of the bond is $1,000. a. If a required market rates are 12 percent, what is the market price of the bond? b. If required market rates fall to 6 percent, what is the market price of the bon

Investment Analysis and Recommendation - BP Oil

Please calculate the weights (proportions) of debt and equity for British Petroleum (BP). For equity you can use the market value of stock (number of shares times the current stock price). For debt, you can use the book value of long-term debt (from the balance sheet). While market values of debt are "better," they are rather di

Market Efficiency Theory

The theory of market efficiency is based on the premise that a market is considered efficient when stock prices are an actual reflection of information known about a company. U.S. markets are generally viewed as semi-strong form market efficient. QUESTIONS: What would happen if U.S. markets became less efficient? What m

EBIT and Contribution Margin

I need tutoring so I can show my work. 1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of

Portfolio Return and Risk Analysis

Select four stocks from,, or One should be a clothing manufacturer, one should be a retailer, one should be an automobile manufacturer, and one should be a restaurant or food producer. 1. Obtain the closing price, the change in price from the previous day, and the be

Calculate the market risk premium and NPV.

If the average annual rate of return for common stocks is 11.7%, and for treasury bills it is 4.0%, what is the market risk premium? What is the net present value (NPV) of the following cash flows at a discount rate of 9%? t=0 -250,000 t=1, 100,000 t=2, 150,000 t=3, 200,000

Straight Line Amortization of Bond Discount

Tano issues bonds with a par value of $180,000 on January 1, 2008. The bonds' annual contract rate is 8%, and interest is paid semi-annually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $170,862. Use the straight-line method to

Finance: Investment Analysis

In 2010 Lilliputian County Hospital's total patient revenues were $15 million. In 2019 patient revenues are expected to be $30 million. What is the compound growth rate in patient revenues over this time period? Shawnee Valley Family Practice Center plans to invest $30,000 in a money market account at the beginning of each year

Accounting: Future Value, Present Value and Compounded Value

Please help with the following: 1. How many years in a typical perpetuity? 2. What is the relationship between the future value factor for five years at 5 percent and the present value factor for five years at 5 percent? 3. If a business manager deposits $30,000 in a savings account at the end of each year for twenty yea

Bond Price, Rate of Return, Yield to Maturity

7. Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half year. The bond has three year until maturity. (a) Find the bond's price today and six months from now after the next coupon is paid. (b) What is the total (six month) rate of return on the bond? 8. Assume

Advantages and Disadvantages of Business Operations in Foreign Countries

As part of its international expansion program, Acme, a U.S. multinational enterprise (MNE), is currently in the planning stages of establishing a Greenfield (see text glossary for definition) production facility overseas. You have been asked to present a proposal to the steering committee comparing the advantages and disadvanta

Consulting Report and Analysis

Brief Overview As an investment consultant to the Alaska Permanent Fund (APF), Your purpose is to write a report designed to persuade your audience, the APF Board, to follow the new direction you will outline for them. You will research the APF on the web to determine the purpose and objectives of the APF and develop a long-ter

Capital Budgeting, WACC, NPV, Options to Delay

1) Assume that a company is planning to undertake a project costing $2,000,000. This amount will be depreciated using straight line depreciation over 5 years. The project will result in increased sales of $3,000,000 a year over the next 5 years. The variable costs on increased sales will be 50% of sales and fixed costs will be $

Interest Rates and the Cost of Capital

Questions: 1. Compare long-term instruments and short-term risks, in terms of the various types of risk to which investors are exposed. Explain your answers. 2. What methods can be used by the FED to influence interest rates? Are these methods effective? Use examples where appropriate. 3. If a company is going to finance a p

Investment Analysis and Recommendation for British Petroleum

Please find an estimate of beta for British Petroleum (BP). Please consider examining or using an industry average beta, especially if the reported beta you find seems unrealistic or inappropriate. Note: You should probably check the beta across a few different sources, because sometimes they vary. Please find the current in

Calcuating for Present Value

Can you please show me how to solve the following problems in excel? Please note that PV stands for present value. PV of multiple cash flows: Jack Stuart has loaned money to his brother at an interest rate of 5.75 percent. He expects to receive $625, $650, $700, and $800 at the end of the next four years as complete repaymen

Diversification of Portfolios

Enron employees were heavily invested in Enron stock through their 401(k) plans. While companies frequently provide a match in the form of company stock, employees are typically free to move the money to an alternative investment. This was true at Enron as well, but most employees chose to leave their money in company stock.