Explore BrainMass
Share

# Finance

### Derivative security analysis: butterfly spread strategy

An investor discovers the call option prices on Platinum Mining Co are: A call with an exercise price of \$1950 costs \$108,43. A call with an exercise price of \$2000 costs \$81,75 and a call with an exercise price of \$2050 costs \$59,98. All the options have the same maturity date. The current stock price is \$2000 a) Create a b

### Please provide step by step in the calculations.

1. A \$50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? a. The annual payments would be larger if the interest rate were lower. b. If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the

### Incorporation of Risk into the Decision-Making Process

Your company has asked you to analyze two mutually exclusive projects for the coming year. Project A will have an initial outlay of \$7,200. Project B will cost \$6,800. Both projects will last for three years. On the basis of the information regarding the risk involved in the two projects, you came up with the following probab

### APV and WACC

3. Hanster Inc. is a levered firm with publicly traded shares. The company has 250 million shares outstanding with a share price of \$16 and an estimated equity beta of 1.50. The company has market value based outstanding debt of about \$400 million in its capital structure. It plans to continuously refinance the debt and keep it

### Calculate the per capita cost per police officer.

The average cost of employing each police officer per year if \$30,000 for a small town. The current population of the town is 1,000. Calculate the per capita cost per police officer. Explain why increased population can result in increased per capita taxes, even though the per-capita cost per police office declines with populati

### Determine break even points associated with common equity.

B. Break point associated with common equity. Oâ??Grady plans to use 25% long term debt in its capital structure. Every \$1 in debt the firm uses, it will use \$3 from other financing sources. Total financing is then \$4, because \$1 comes from long term debt, its share in the total is the desired 25%. After firm raises \$700,000

### Calculating the dependency ratio for a country

Suppose the average Social Security benefits in the nation are \$12,000 per year. The number of Social Security pension recipients is currently 50 million. There are 150 million workers in the workforce this year and the average taxable wage per worker if \$25,000 per year. Calculate the dependency ratio for the nation. Show and e

### Calculating interest factor and future value

Single sum - Rate - Time - Compounding frequency - interest factor - future value \$1,000 12% 2yrs annual \$1,000 12% 2yrs semiannual \$1,000 12% 2yrs quarterly \$1,000 12% 2yrs monthly How to get the interest

### highest probability of the decrease

Hello, I have provided details regarding possible scenarios and need help figuring out which one to choose. Please help me determine which scenario would be best.

### NPV Detailed Calculations

Please also provide detailed step by step explanation to assist in understanding future related problems. (NPV) Your division is considering two investment projects, each of which requires an upfront expenditure of \$15 million. You estimate that the investments will produce the following net cash flows: Year Project A Pro

### Choose the economical generator in the given situations.

A portable generator is needed at a remote construction site. Two alternatives are being considered. Their annual fixed costs and operating and maintenance costs per hour are shown in the table below. The contractor runs three 8-hour shifts per day for 250 working days per year Generator 1 Fixed cost per year \$4000 O&M

### Comparative Present Worth of Each of the Three Alternatives

Castille Pharmaceuticals (CP) currently leases testing equipment for use during the production of a product at a cost of \$61,000 annually that includes all maintenance expenses. The product line produced on the machine has revenues of \$100,000 annually. Three options need to be evaluated. 1. Continuing to lease the present mac

### Concentration Ratios and the Herfindahl-Hirschman Index

In both Industry C and D, there are only four firms. Each of the four firms in C industry has a 25 percent market share. The four firms in Industry D have market shares of 80, 10, 5 and 5 percent, respectively. a. Calculate the three- and four-firm concentration ratios for each industry. b. Calculate the Herfindahl-Hirsc

### Your managing director asks if you can participate in a seminar that the firm is doing on tax efficient financial planning. He would like you to send him, in memo form, the various types of vehicles that can be used by clients to reduce the various kinds if taxation. Prepare a memo to the managing director that explains the different vehicles available that can be used for each of the following: Minimize income tax Minimize capital gains tax Minimize estate tax

Your managing director asks if you can participate in a seminar that the firm is doing on tax efficient financial planning. He would like you to send him, in memo form, the various types of vehicles that can be used by clients to reduce the various kinds if taxation. Prepare a memo to the managing director that explains the d

### Retirement Fund

Thomas is considering retiring and migrating to a rental property in the Virgin Islands. Thomas presently owns a home appraised at \$595,000 with \$300,000 remaining on the home loan. He has about \$350,000 in savings right now. The Virgin Island rent will be \$1,000 a month and he estimates that he and his wife can live on \$3,000

### Virtual stock market investment system

Students have to initiate a 3 weeks investment simulation on the New York Stock Exchange. With a starting virtual budget of \$10,000, they must build their own information system that will be used as a support to take operational decisions: buying or selling shares from 5 American companies. Each decision involves a cost for b

### Evaluate Continuous Variables

See the attached files. Consider the model Y = B_0 + B_1X_1+B_2X_2+e, e ~ N(0, σ^2) where the 'xs are all continuous variables. You also have data on a qualitative variable denoted d1 for each observation, where d1 = 1 if the observation belongs to group 1, and zero otherwise. 1) Assume you want to set an empirical model

### Stock Price Question

What is the maximum stock price that should be paid for a stock today that is expected to consistently pay a \$5 quarterly dividend (paid out to the investor) if its price is expected to be \$100 in 3 years (12 quarters)? The investor expects a minimum acceptable rate of return (MARR) of 10% with quarterly compounding. Need he

### Maximum stock price using MARR

What is the maximum stock price that should be paid for a stock today that is expected to consistently pay a \$5 quarterly dividend (paid out to the investor) if its price is expected to be \$100 in 3 years (12 quarters)? The investor expects a minimum acceptable rate of return (MARR) of 10% with quarterly compounding.

### a cash conversion cycle

The Phoenix Corporation is interested in examining its cash conversion cycle. Suppose a Phoenix manager has assembled the following data for your use: \$2.75 million Average Inventory \$1.05 million Average Accounts receivable \$0.60 million Average Accounts payable \$0.45 million Wages, benefits, and payroll taxes payable \$7

### Price leadership demonstrated through a case study.

How would a low-cost price leader enforce its leadership through implied threats to a rival? Provide at least one example of such a strategy.

### Corporate Finance Discussion

Integrative Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for \$ 6.00. Each latch has variable operating costs of \$ 3.50. Fixed operating costs are \$ 50,000 per year. The firm pays \$ 13,000 interest and preferred dividends of \$ 7,000 per year. At this poi

### universal concerns of financial management

The universal concerns of financial management are controlling costs, ability to have available cash to pay obligations, ability to access capital for expansion and the ability to conserve the asset base of the organization. Give an example of a company that has failed in at least one of these universal concerns. Further disc

### Two of your closest competitors have sought and have received approval to merge, creating a new competitor larger than yourself. What does the approval of the merger say to the degree of competitiveness in your industry? What is the most important adjustment you will make? Your company has experienced its first quarterly sales increase in 8 quarters. The increase is due primarily to success in Latin america. How does this news affect your strategy for the coming year? What types of changes would you recommend?

Two of your closest competitors have sought and have received approval to merge, creating a new competitor larger than yourself. What does the approval of the merger say to the degree of competitiveness in your industry? What is the most important adjustment you will make? Your company has experienced its first quarterly sale

### Leverage that Affects EBIT and EPS

Scenario: I heard something from Bob the bartender the other day (Joe, the former bartender, left to form a financial consulting company). He said one type of leverage affects both EBIT and EPS. I wonder what that meant. Then he said the other type of leverage affects only EPS. I really need some help on this one. What do yo

### EPS and EBIT overview

I have always heard that one type of leverage affects both EBIT and EPS. I wonder what that meant? Then I also heard that the type of leverage affects only EPS. I really need some help on this one. What do you think is meant by each of the statements?

1. Some economists believe that the financial crisis we have been experiencing during the last years is the result of a fundamental change in attitude of the American population over time. In other words, during the 50s and 60s Americans were hard working, conservative, lenders and exporters. Today, we would like to work less fo

### CAPM

Suppose the rate of return on short-term government securities (perceived to be risk-free) is 5%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the CAPM 1. What is the expected rate of return on the market portfolio? 2. Suppose you consider buyi

### accounting profit

Jill resigns from her job, at which she was earning \$50,000 per year, and uses her \$100,000 savings, on which she was earning 5 percent interest, to start a business. In the first year, she earns revenue of \$150,000, and her costs are as follows. Rent \$25,000 Utilities \$12,000 Wages \$30,000 Materials \$20,000 A. Calcul

### Stocks and Portfolio

Returns State of the economy Probability A Comp. B Comp Good 70% 5% 40% Normal 20% 12% 25% Poor 10% 20% 7% What are the expected returns for A and B Comp? What is the standard deviation for each stock? What is the expected return for the portfolio if you i