Sally Sanford is buying an automaoblie that costs $12,000. She will pay $2,000 immediately and the remaining $10,000 in four annual end of year principal payments of $2,500 each. In addition to the $2,500, she must pay 15% interest on the unpaid balance of the loan each year. Prepare a cash flow table to represent the situation.
2-3 Assume that a risk-free rate is 6% and the market risk premium is 6%. What is the expected return for the overall stock market? What is the required rate of return on a stock that has a beta of 1.2? 2-4 Assume that the risk-free rate is 6% and the expected rate of return on the market is 13%.
44. Manuel exchanges a rental house at the beach with an adjusted basis of $150,000 and a fair market value of $125,000 for a rental house at the mountains with a fair market value of $100,000 and cash of $25,000. What is the recognized gain or loss? a. $0. b. $100,000. c. $25,000. d. ($25,000). e. None of the above. C
Chapter 11 30. James has investments in two passive activities. Activity A, acquired three years ago, produces income in the current year of $175,000. Activity B, acquired last year, produces a loss of $275,000 in the current year. At the beginning of this year, James's at-risk amounts in Activities A and B are $150,000 a
Prior to the NASDAQ crash, which ratio(s) should investors have used to give them a sense of the value of the dot.com stock? What do you think the ratios would have
At the beginning of 2004, Bellamy Company acquired equipment costing $60,000. It was estimated that this equipment would have a useful life of 6 years and a residual value of $6,000 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be
Why do stock prices change? Suppose the expected D1 is $2, the growth rate is 5 percent and the required rate of return is 10%. Using the constant growth model, what is the price? What is the impact on stock price if the growth rate is 4% or 6%? If rate of return is 9% od 11%?
W.F. Bailey Company had a quick ratio of 1.4, a current ratio of 3.0, an inventory turnover of 5 times, total current assets of $810,000, and cash and marketable securities of $120,000 in 2007. If the cost of goods sold equaled 86 percent of sales, what were Baileys annual sales and its DSO (days sales outstanding).
Van Auken Lumber: Income Statement for December 31, 2007 ($ thousand) Sales $36,000 Cost of goods sold (25,200) Gross Profit $10,800 Fixed operating costs (6,480) Earnings before interest and taxes $4,320 Interest (2,880) Earnings before taxes $1,440 Taxes (40%) (576) Net Income $ 864 Dividen
The Niendorf Corporation produces tea kettles which it sells for $15 each. Fixed costs are $700,000 for output up to 400,000 units. Variable costs amount to $10 per kettle. A) What is the firm's gain or loss at sales of 125,000 units? Of 175,000 units? B) What is the breakeven point? C) What is Niendorf's degr
A. Use the information attached to calculate the actual and sustainable growth rate for each year. Chapter 4 Problem 8 -- Eight Ball Sporting Goods a. Use the information below from Eight Ball's annual financial statements to calculate the actual and sustainable growth rate for each year. Ei
Is it possible for an EFN estimate (or a 'plug number' on a pro-forma balance sheet) to be negative? If you obtain this result, do you interpret it as an indication that you've made a calculation error, or is there some other interpretation you should make?
If I am considering refinancing my mortgage, my current rate is 7% with 14 years left and was negotiated one year ago with $2,000 closing costs. The new loan would be 5.5% for 15 years with a closing cost of $1500. Describe how I would decide whether or not to refinance. Include qualitative considerations.
Provide a general overview of FORD MOTOR CO financial status. Talk a little bit about the company and its past, present, and estimated future stock earnings. Provide some data out of the websites to provide support.
The Charleston Company is a relatively small, privately owned firm. Last year the company had after-tax income of $15,000, and 10,000 shares were outstanding. The owners were trying to determine the market value for the stock, prior to taking the company public. A similar firm which is publicly traded had a price/earnings ratio
The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock?
Assume that a 3-year Treasury note has no maturity premium, and that the real, risk-free rate of interest is 3 percent. If the T-note carries a yield to maturity of 13 percent, and if the expected average inflation rate over the next 2 years is 11 percent, what is the implied expected inflation rate during Year 3?
First examine your public company of choice for investment from the previous exercise. Then present a brief and powerful financial case for investment in your company to the others in the class. Use all of your powers of persuasion, marketing, or advertising in your pitch.
In a world of two risky funds: A stock fund with an expected return of 12% and a standard deviation of 10% and a bond fund with an expected return of 8% and a standard deviation of 6%. Plot the efficient frontier given that the covariance is -0.006. Bonus question: Given the information in 4 above, what should be the risk fre
The common stock of Leaning Tower of Pita, Inc., a restaurant chain will generate the following payoffs to investors next year: Dividend Stock Price Boom $5.00 $195 Normal economy $2.00 $100 Recession $0.00 $0 The company goes out of business if a recession hits. Calculate the ex
Enter formulas to solve the requirements of this problem The payoffs in year 5 to George Pickwick and First Cookham are as follows: First Cookham buys 2 million shares at $1 Company value in 5 years After stage-2 financing Payoff to: $2,000,000 $12,000,000 G. Pickwick FORM
Enter formulas to solve the requirements of this problem. a. How many shares would the company have needed to issue to raise the same amount of money? Shares issued formula. b. How much more would the existing shareholders have made from the sale? Additional proceeds formula. c. Wha
Enter formulas to calculate the requirements of this problem. a. What is the average underpricing of this sample of IPOs? Average underpricing FORMULA b. What is the average initial return on my "portfolio" of shares purchased from the four IPOs I bid on? Calculate the average initial
Can someone please, at first glance, explain to me what the attached slide is really saying. If you were given this slide without any knowledge of the topic, what would be your analytical assessment of the chart. Is there anything about the slide that sticks out like a sore thumb? Please beak it down with your professional in
What is financial leverage? Why might a company that has a high degree of operating leverage not want to have a high degree of financial leverage? Are there exceptions to this "rule"?
22. What is the expected return on the following portfolio? STOCK SHARES PRICE EXPECTED RETURN ART 1,500 $40 22% BAC 2,000 31 19 DUD 500 85 29 Use the following data for questions 23 & 24. Cost of Goods Sold $22mm Inventory $4mm Credit Sales $26mm Accounts
Bob's Burritos sells all of their burritos for $4.50 while the cost is only $3.00. If the monthly fixed expense is $1,500, how many burritos must Bob sell a month to breakeven? Need the exact number of burritos to sell in a month in order to break-even, I must show how to get that number, and I am having a problem with the f
Security A Security B Pa Ra Pb Rb 0.1 -10% 0.1 -30% 0.2 5% 0.2 0 0.4 15%
Suppose A has an expected return of 10 percent and a standard deviation of 20 percent. Asset B has an expected return of 16 percent and a standard deviation of 40 percent. If the correlation between A and B is 0.6, what are the expected return and standard deviation for a portfolio comprised of 30 percent Asset A and 70 percent
The real risk free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.2%. How would I go about calculating the maturity risk premium for this 2-year security?