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Investment Analysis

You have $40,000 to invest on Sophie Shoes, a stock selling for $80 a share. The intial margin requirement is 60 percent. Ignoring taxes and commissions, show in detail the impact on you rate of return if the stock rises to $100 a share and if its declines to $40 a share assuming: (a) you pay cash for the stock and (b) you buy i

Would like someone to explain how to estimate stock price volatility and apply it to this question. Question: Suppose that observations on a stock price (in dollars) at the end of each of 15 consecutive weeks are as follows: 30.2, 32.0, 31.1, 30.1, 30.2, 30.3, 30.6, 33.0, 32.9, 33.0, 33.5, 33.5, 33.7, 33.5, 33.2 Estimate the stock price volatility. What is the standard error of your estimate

Would like someone to explain how to estimate stock price volatility and apply it to this question. Question: Suppose that observations on a stock price (in dollars) at the end of each of 15 consecutive weeks are as follows: 30.2, 32.0, 31.1, 30.1, 30.2, 30.3, 30.6, 33.0, 32.9, 33.0, 33.5, 33.5, 33.7, 33.5, 33.2 Esti

Finance Problems P1-1A, P1-2A, BYP1-4

P1-1A. Barone's Repair Inc. was started on May 1. A summary of May transactions is presented below. 1. Stockholders invested $10,000 cash to start the repair company. 2. Purchased equipment for $5,000 cash. 3. Paid $400 cash for May office rent. 4. Paid $500 cash for supplies. 5. Incurred $250 of advertising costs in the

Computing After-tax Returns

Mr. Smith is in the 30% tax bracket. He earns $50,000 per year. What is his tax bracket after-tax income? 50000 x 0.60 = (1-0.40 = 0.60) 50000 x 0.60 = 30000.00 Mr. Smith has two investment opportunities: a. Megacorp, a for-profit healthcare company offering a bond at 8% b. Good Neighborcare, a not for profit h

Evaluating Alternatives for Raising Funds

ORNE Corporation plans to raise $2 million to pay off its existing short-term bank loan of $600,000 and to increase total assets by $1,400,000. The bank loan bears an interest rate of 10 percent. The company's president owns 57.5% percent of the 1,000,000 shares of common stock and wishes to maintain control of the company. Th

Maloney's effective financing rate of borrowing dinar

Maloney Manufacturing Company obtains a one-year loan of 2,000,000 Sudanese dinar (SDD) at an interest rate of 6%. At the time the loan is extended, the spot rate of the dinar is $.005. If the spot rate of the dinar at maturity of the loan is $.0035, what is the effective financing rate of borrowing dinar?

What will be the financing cost for MNE's bonds

An MNE issues ten-year bonds denominated in 500,000 Philippines pesos (PHP) at par. The bonds have a coupon rate of 15%. If the peso remains stable at its current level of $.025 over the lifetime of the bonds and if the MNE holds the bonds until maturity, the financing cost to the MNC will be:

Stock efficiently priced

See attached file. First carefully study the financial data and info which is entitled 'Selected Apple Inc.' (AAPL) Financial Data and Info and is provided as an attachmentat. Next, answer the two questions that follow. A. Strictly based on the given information, can you tell me if Apple's stock was efficiently priced at t

Finance Problem

The controller of Dugan Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. MONTH- MAINTENANCE COST MACHINE HOURS January $2,400 300 February

Quote a British pound cross-rate for Swiss Franc

You are given the following spot exchange rates: SFr in Zurich, S(SFr/$): 1.6000-35 SFr/$ £ in NY, S($/£): 1.9810-50 $/£ As a banker in London, you would like to quote a British pound cross-rate for Swiss Franc (i.e., S(£/SFr)). If you anticipate to be the sole banker in the world quoting this cross-rate, what is

Control growth in health care spending: limits to reimbursement to providers

One method commonly used by both governments and private health insurers to control the growth in health care spending are limits to reimbursement to providers. How can these limits to reimbursement be viewed as the exercise of monopsony power? To prevent health care providers from prescribing more services it is often common to

Calculating break even sales and terminal value

1. Company makes rubber stamps which sells for $400 each; their fixed costs are $75,000 and variable costs are $250 per rubber stamp. What is the break even point in dollars and in units? 2. What is the terminal value at the end of 3 years for $100 deposit per year if it earns interest at 8% compounded annually?

Value of common stock

Company has had declining sales and increasing expenses over the last decade and expects this trend to continue. As a result, the company predicts that earnings and dividends will decline indefinitely at a rate of 4% per year. Company's last dividend (D/OD) was $2 per share. If the market required rate of return is 125%, es

Rate of return for expected dividend

Company stock is currently selling for $25 a share. Company is expected to pay a dividend of $.75 at end of this year. If company stock is bought today and sold for $29 after receiving the dividend, what rate of return would you earn?

Investment Banking Process

Which of the following statements concerning common stock and the investment banking process is NOT CORRECT? A. The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue. B. If a firm sells 1,000,000 new shares of Class B stock, the transacti

Dunbar Hardware: Maximum Price Per Share

Dunbar Hardware, a national hardware chain, is considering purchasing a smaller chain, Eastern Hardware. Dunbar's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million, and they have determined that the appropriate discount rate for valuing

Advantage of going public

Which of the following is generally NOT true and an advantage of going public? a. Facilitates stockholder diversification. b. Increases the liquidity of the firm's stock. c. Makes it easier to obtain new equity capital. d. Establishes a market value for the firm. e. Makes it easier for owner-managers to

Increasing Market Value for a Company

Which of the following does NOT always increase a company's market value? a. Increasing the expected growth rate of sales. b. Increasing the expected operating profitability (NOPAT/Sales). c. Decreasing the capital requirements (Capital/Sales). d. Decreasing the weighted average cost of capital. e. Inc

Market Value / Total Value

Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what would Firm L's total value be if it had no debt?

Inventory turnover and AR days

X company has total annual sales (all credit) of $400,000 and a gross profit margin of 20%. Its current assets are $80,000; current liabilities $60,000; inventories $30,000; cash $10,000. a) How much average inventory should be carried if management wants the inventory turnover to 4? b) How rapidly (in how many days) mus

Constant growth DVM Finance Problem

Assume you obtain the following information about a certain company: Total assets $50,000,000 Total equity $25,000,000 Net income $ 3,750,000 EPS $5.00 per share Dividend payout ratio 40% Required return 12% Use the constant-growt

Hedge fund Fee & Assets

Suppose a hedge fund provides that the management fees are 1% of the total assets plus 20% of the profits annually. The gross returns on the fund are shown below. 2008 2009 2010 2011 2012 End-of year assets 125,000,000 ? ? ? ? Gross return

Finance practice exam problems

1) A company's stock sells at a P/E ratio of 21 times earnings. It is expected to pay dividends of $2 per share in each of the next five years and to generate an EPS of $5 in year 5. Using the "dividends-and-earnings model" and a 12% discount rate, compute the stock's justified price. 2) A particular company currently has

Economics: Practice Exam Questions

1. The real return is 10% and the expected rate of inflation is 4.5%. what is the nominal rate? 2. a company had sales of $1,250,000, cost of goods sold of $750,000 depreciation expenses of $250,000 and interest expenses of $50,000. If the company's tax rate is 34% and the income state is complete, what is this firm's opera

Sample Financial Information for Variable and Fixed Costs

Define Variable and Fixed Cots - For the variable cost, if the Unit price for service is $175 yen per hour justify variable cost associated with price which would include in this case probably only labor cost (for example, maybe 2 persons at 25 yen per person per hour? up to you!) For fixed costs, make it simple, show an annual

Investment with higher return

You are trying to choose between two different investments, both of which have up-front costs of $65,000. Investment M returns $135,000 in six years. Investment N returns $195,000 in 10 years. Which of these investments has a higher return? use formulas (not excel)