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    Value of a business

    What would the present value of a business that earns the following profit be using a 5-yr life span and a 12% risk-adjusted discount rate. yr 1 Expected profit received at end of yr $10,000? yr 2 Expected profit received at end of yr $20,000? yr 3 Expected profit received at end of yr $50,000? yr 4 Expe

    Return on equity

    Businesses are now providing stocks to managers for increased financial performance using annual return on equity. How would this decrease the agency problem between managers and shareholders as a whole? Why could directors be more efficient than shareholders at increasing managerial performance and changing their incentives?

    Standard & Poor's 500 Stock Market Index

    What is considered a poor, average, or good index? What kind of scale does Standard & Poor use? Which is better a higher or a lower index? Specifically, what does this score tell us exactly regarding economic growth? Would this information be helpful to a small business that is planning its strategies for the following year?

    Acquisition problem

    Please use “Superior Printing” (Harvard Business School case, no. 9-800-197) for your response. ----- Sorry to drop this in your lap, but I've got to fly to New York to work on the goReader deal. To recap our conversation today: 1. Superior Printing has hired us to advise them on how to finance their acquisition of B

    Present Value Calculations: Present Worth of Computers R Us'

    The Engineering Economics Finance Company (EEFC) had approached Dr. T. Man, a private investor, the day before. It seemed that EEFC was interested in loaning money to Computers R Us Enterprises, one of its larger clients, but Computers R Us Enterprises' demands were such that EEFC could not manage the whole thing. Specifically,

    Calculating Returns on Stocks

    I have a set of monthly stock performance figures. I have to calculate the % return for each month. Here is an example of my data: Jul 04 - 19.09 Jun 04 - 19.06 May 04 - 17.95 Apr 04 - 14.22 Mar 04 - 14.14 To determine the % return for Jul 04 would I take (19.09 - 19.06)/19.06 to come up with .62%? Would I then take

    Corporate Finance

    Question 1: The attached table contains a summary of (daily) data on two stocks and the market. a) Compute the expected returns and standard deviation of a portfolio composed by 80% WMT and 20% MRK. Comment on your results. b) Compute the beta for WMT and MRK. c) Discuss total risk, diversifiable and undiversifiabl

    Corporate Finance

    Question 1 A company has a capital structure composed by 20% Debt and 80% Equity. The cost of the debt is 5% per year while the cost of equity is 15% per year. The company is considering two different projects. The cash flows of the two projects are reported in the table below. Please see attached. A company has a capita

    Corporate Finance: Project Cash Flows; NPV

    Question 1 PLI produces unusual gifts targeted at wealthy consumers. The company is analyzing the possibility of introducing a new device designed to attach to the collar of a cat or dog. This device emits sonic waves that neutralize airplane engine noise, so that pets traveling with their owners will enjoy a more peaceful ride

    Compounding Interest Rates

    I am looking for the formula to solve this problem: What interest rate would allow you to accumulate 10,000 in 8 years if you saved $60 per month and earned compound interest monthly.

    Call Option

    . You are based in Canada. A 1yr call option to buy USD at strike1.3500 CAD/USD has premium of .0595CAD. Spot CAD/USD is 1.3535. a) What is the moneyness of the call? What is its intrinsic value and time value? b) Everything being equal, if the option has a life of 6M, is the call option going to cost more or le

    Weak Form EMH

    Question enclosed! Lets assume we consider data on a groups of companies of similar investment risk. It was stated in class that under the weak form of EMH, the movement of price of a stock i is a random walk: where is the same for all stocks in the group and is independent of, and cannot be predicted by, past prices.

    Variance/Covariance Efficient Portfolios

    Question 9. You have the following info about company ABC: Variance of market returns = 0.05492 Covariance of the returns on Durnham and the market = 0.0635 Suppose that the market risk premium is 8.4% and the expected return on Treasury bills is 4.9%. a. Write the equation characterizing the set of efficent portfolios in

    stock's beta

    Simons stock is currently selling for $40 a share. the stock is expected to pay a $2 dividend at the end of the year. the stock's dividend is expected to gorow at a constant rate of 7% a year forever. The risk free rate is 6% and the market risk premium is also 6%. what is the stock's beta?

    Stocks..current price..selling price

    Avery industries jsut paid a dividend of $2.00 per share (i.e.,D0=$2.00). analysts expect the company's dividend to grow 25% for the next 2 yrs and 15% for the following 3 years. After 5 years the dividend is expected to grow at a constant rate of 5%. the required rate of return on the company's stock is 12%. what should be the

    Equation Rather than to Calculate it Manually

    One day your economics professor shows you a picture of a BMW automobile. You mess around with different configurations for the available options and accesories and it can be yours for $77,942. You notice a rather sinister glint in your professor's eye as he notes your interest in the car, but tells you nonetheless that you wo

    Interest Rates Present Values

    What is the present value of $50 per year in each of the next three years if the interest rate is 10 percent? a) $150 b) $45.45 c) $124.34 d) $165.00 e) $168.00

    Annuity Calculations

    Please include with your response any necessary formula to solve this problem (on a regular calculator, NOT a financial calculator), along with a detailed explanation of how to solve the problem. You are offered an annuity of $10,000 for 10 years starting four years from now. With interest rates at 5%, how much should you b

    Cost of Preferred Stock

    Medco Corporation can sell preferred stock for $80 with an estimated flotation cost of $3. It is anticipated that the preferred stock will pay $6 per share in dividends. Compute the cost of preferred stock for Medco Corp.

    NPV versus IRR

    19. NPV versus IRR. Here are the cash flows for two mutually exclusive projects (data in Excel attachment) a. At what interest rates would you prefer Project A to B? Hint: Try drawing the NPV profile of each project. b. What is the IRR of each project? Project C0 C1 C2 C3 A ($20,000) $8,000 $8,000 $8,

    Financial Management

    Which of the following are concerns about target costing? a. Conflicts may arise within organizations. b. Employees may experience burnout due to the pressures of meeting target costs. c. Development time may increase. d. All of the above.

    Financial Management

    Which of the following is least likely to be a barrier in ABC implementation? (a) computer hardware and software problems (b) individual resistance to change (c) organizational resistance to change (d) lack of senior management commitment

    Annuity Value and the Lottery

    Please include in your response the formulas needed for this problem, as well as a detailed explanation as to how to solve them. The $40 million lottery payment that you just won actually pays $2 million per year for 20 years. If the discount rate is 8 percent, and the first payment comes in 1 year: a) What is the present

    Annuity Values

    a) What is the present value of a 3-year annuity of $100 if the discount rate is 6 percent? b) What is the present value of the annuity from part (a) of this question if you have to wait 2 years instead of 1 year for the payment stream to start?

    Number of Periods

    Please include a formula for the calculations, along with an explanation of how to work out the problem. How long will it take for $400 to grow to $1,000 at the interest rate specified? a) 4 percent b) 8 percent c) 16 percent

    summary of Greenspan's opinion on trade

    A http://www.federalreserve.gov/BoardDocs/speeches/2004/20040126/default.htm b. Read the above speech and summarize Greenspan's opinion on trade. Does he admonish the current administration's policies on trade? What does he say about job movement overseas and labor costs.

    Credit Policy Example: Universal Bed Corporation

    Credit Policy. As treasurer of the Universal Bed Corporation, Aristotle Procrustes is worried about his bad debt ratio, which is currently running at 6%. He believes that imposing a more stringent credit policy might reduce sales by 5% and reduce the bad debt ratio to 4%. If the cost of goods sold is 80% of the selling price, sh