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Task 2b: Problem Set

1. Consider a firm with a trading book valued at $100 million. The return of these assets is distributed normally with a yearly standard deviation of 25 percent. The firm can liquidate all of the assets immediately. How much capital should the firm have so that 99 days out of 100, the firm's return on assets is high enough that,

Debt Policy Importance

Executive Chalk is financed solely by common stock and has outstnading 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use the proceeds to buy back common stock. a. How is the market price of the stock affected by the announcment? b. How many shares ca

Limited Liability Corporation and Partnership

Write a 700- to 1,050-word answer in which you explain roles of limited liability corporations and partnerships. If you were establishing your own business, under what circumstances would you choose one instead of the other? APA format

What conditions favor the use of long-term debt?

1. When a number of alternative methods of long-term financing are under considerations; what conditions favor the use of long-term debt? 1a.When a number of alternative methods of long-term financing are under considerations; what conditions favor the use of common stock. Please explain.

A call center owes your company money

Your company has entered into written contracts with the call center in Fabulous County, Florida. Recently, the call center has not been paying for your company's services. The call center owes your company amounts between $15,000 and $25,000. Your committee has the task of deciding whether to bring a lawsuit to collect these am

Finance: Use of cash; price movements in markets; sunk cost

51 Which of the following would be classified as a use of cash? a. An increase in accounts payable. b. A decrease in inventories. c. A decrease in accounts receivable. d. An increase in retained earnings. e. An increase in inventories. 53 Empirical evidence shows that financial market price movements are essentially rand

Decomposition equation

18 Which of the following would least likely be considered as signaling a potential problem regarding the "quality of earnings" for a firm? a. the firm has experienced a significant increase in earnings relative to the industry overall b. the firm's accounts receivable account is increasing at a rate faster than the firm's inc

Assume wealth

2 If market interest rates are currently 15% and your investment provides you this 15% return, does that imply that you are 15% more wealthy (after vs before this investment return)? Assume wealth is defined as the ability to consume (purchase) goods or services. a. Yes, because with inflation you do indeed have 15% more money

Finance

Need help with attached problems. FIN 450 Week 7 Chapter 21 Questions 11. What do 12b-1 fees pay and what is the maximum amount that these fees can be? 15. What regulatory changes have been adopted or are being considered to deal with abuses in the mutual fund industry? Quantitative Problems On January 1, a mut

Investment Fund

For questions 67-68, consider the following information for the BU Scholarship Investment Fund. The total investment in the fund is $1 million. STOCK INVESTMENT BETA EXPECTED RETURN A $200,000 1.5 25% B $300,000 -0.5 4% C $500,

Stock's expected price today

43 Regardless of your work above, assume that D0, which was just paid, = $1.00, D1= $1.20, D2 = = $1.40, D3 = $1.55, D4 = $2.00, D5 = $2.13, D6 = $2.27, and P3 = $80.00. What should be the stock's expected price today, (i.e.. P0)? I encourage you to draw a time line clearly indicating the situation. Again, assume the require

Contingent payoff

31 The simple corporation has an outstanding debt obligation (total of principle and interest due) to the Complex Corporation of $250 (Assume this is Simple's only debt.). It is year end and the total cash flow of Simple from all sources is $325. The contingent payoff to the debt and equity holders of Simple Corporation is: a

Share prices

Apex Inc., is a biotechnology firm that is about to announce the results of its clinical trials of a potential new cancer drug. If the trials were successful, apnex stock will be worth $70 per share. If the trials were unsuccessful, Apnex stock will be worth $18 per share. Suppose that the morning before the announcement is s

I need help preparing a cash budget

Prepare a cash budget for XYZ Company for the first three months of 2004 based on the following information: Month Estimated Sales Estimated Factory Overhead Estimated Selling, General and Admin Expenses (SG&A) December $ 2,800,000 $ 320,000 $ 625,000 January 4,000,000 325,000 637,500 February 5,600,000 335,000 642,50

Ratios for three companies using recent five year averages

Compute a recent five-years average of the following ratios for three companies of your choice (attempt to select diverse firms) : A-Retention rate. B-Net profit margin C-Equity turnover D-Total asset turnover E-Total assets/equity Based on these rations, explain which firm should have the highest growth rate of earnin

Finance MCQ: Common, preferred stock, equity capital, cumulative dividend

1.Key differences between common stock and bonds include all of the following EXCEPT 1. bonds have a stated maturity but stock does not. 2. common stockholders have a junior claim on assets and income relative to bondholders. 3. common stockholders have a voice in management; bondholders do not. 4. dividends paid to bondho

Calculating firm value for overtime corporations

Problem: Overtime Corporation expects an EBIT of $35,000 every year forever. Overtime Corporation currently has no debt, and its cost of equity is 14 percent. The company can borrow at 8 percent. If the corporate tax rate is 38 percent, what is the value of firm? What will the value be if the company converts to 50 percent debt

Questions involving a company's finances

The basket of goodies costs $300, and is expected to cost $515 next year. The real rate of interest is 2%. Our company, Basic, Inc. has a bond risk premium of 2.5% and a preferred stock risk premium of 3%. The Market Risk Premium is 4% and Basic has a Beta of 1.25. Basic's target capital structure is 40% debt, 50% common s

Enterprise Market Value of Hp

A. General Mills, Inc., the large manufacturer of packaged foods, reported the following in its annual report for the year ending May 25, 2008 (in millions): Short-term borrowing $ 442.0 Long-term debt 4,348.7 Stockholders' equity 6,215.8 The short-term borrowing and long-term debt are carried on the balance sheet at app

Grotius Corporation Patent Amortization

A patent was acquired by Grotius Corporation on January 1, 2000, at a cost of $72,000. The useful life of the patent was estimated to be 10 years. At the beginning of 2004, Grotius spent $9,000 in successfully prosecuting an attempted infringement of the patent. At the beginning of 2005, Grotius purchased a patent for $25,000 th

Bank Loan

I need assistance with the following: The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though

Finance Problems: Investments

1) Stock A has the following probability distribution of expected returns. What is Stock A's expected rate of return and standard deviation? . Probability________Rate of Return 0.1.............................-15% 0.2.................................0 0.4................................5 0.2............................10

Pension amortization-Calculating Expense

Hello, I do not seem to find my notes on the years-of-service method in calculating and my book is not explaining it well enough. Can someone show me how to do this? On January 1, 2003, Sunny Incorporated amended its pension plan which caused an increase of $4,800,000 in its projected benefit obligation. The company has 40