Two stock abc and xyz have expected returns of 30% and 40% with standard deviation of 15% and 20% respectively. What will be average return and risk if 40% of ones. Funds are invested in ABC and 60% are invested in XYZ
A corporation hires a company to determine the relationship between its profit and its output. The report back is that the relationship is: ? = 1/3Q^3-3Q^2+5Q+250 It states that profit is maximized when Q=1. The company believes that the relationship as stated above is correct, but they disagree with the results that pro
Profit margins and turn over ratios vary from one industry to another. What differences would you expect to find between a grocery chain such as a Safeway and steel company? Think particularly about the turnover ratios, the profit margin and Du Pont equation.
Valdes Enterprises is considering issuing a 10-year convertible bond that would be priced at its $1,000 par value. The bonds would have an 8.00% annual coupon, and each bond could be converted into 20 shares of common stock. The required rate of return on an otherwise similar nonconvertible bond is 10.00%. The stock currently se
Using the Discounted-Cash-Flow formula, what effect will increase the required rate of return on the Present Value? I think the PV will increase, but I'm confused with the formula. Can you help please? Using the Discounted-Cash-Flow formula, what effect will increase the required rate of return on the Present Value? a. I
Question A: After a protracted legal case, Joe won a settlement that will pay him $11,000 each year for the next ten years. If the market interest rates are currently 5%, exactly how much should the court invest today, assuming end of year payments, so there will be nothing left in the account after the final payment is made?
You're the manager of global opportunities for a US manufacturer, who is considering expanding sales into Europe. Your market research has identified three potential market opportunities: England, France, and Germany. If you enter the English market, you have a 0.5 chance of big success (selling 100,000 units at a per unit profi
The Zocco Corporation has an inventory conversion period of 75 days, a receivables collection period of 38 days, and a payables deferral period of 30 days. a. What is the length of the firm's cash conversion cycle? b. If Zocco's annual sales are $3,421,875 and all sales are on credit, what is the firm's investment in accoun
A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40. APP always takes the discount, but takes the full 15 days to pay its bills. What is the average accounts payable for APP?
FS, Inc. stock is selling for $28 a share. A 3-month call on FS stock with a strike price of $30 is priced at $1.50. Risk-free assets are currently returning 0.3% per month. What is the price of a 3-month put on GS stock with a strike price of $30?
Johnson, Inc. has $4.2 million in net working capital. The firm has fixed assets with a book value of $48.6 million and a market value of $53.4 million. Vandy & Sons is buying Johnson, Inc. for $60 million in cash. The acquisition will be recorded using the purchase accounting method. What is the amount of goodwill that Vandy &
Consider the follwing pre-merger information about firm x and firm y. Problem is attached in excel file. Balance Sheets for Mergers firm x firm y total earnings 40000 15000 shares outstanding 20000 20000 per share values: market 49 18 book 20 7 Assume that firm x acquires firm y by paying cash for all the shares outst
Southern Alliance Company needs to raise $30 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 60 percent common stack, 10 percent preferred stock, and 30 percent debt. Flotation cost
A piece of newly purchased industrial equipment costs $925,000 and is classified as seven-year property under MACRS. Calculate the annual depreciation allowances and end-of-year book values for this equipment.
1. A firm is expected to earn $10,000, $25,000, $48,000, and $75,000 during the next four years, after which it will be dissolved. What is the present value of the firm if the discount rate is 8%? Please show work and explain rationale.
For the cash flows in the previous below, what is he NPV at a discount rate of zero percent? What If the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? Year Cash Flow 0 -$18,000 1 9,800 2 7,500 3 7,300
Hello, I've been doing some trial on this specific problem, and have spent quite some time on it, but I still can't figure out the answers. I was actually wondering If I could have an hand in resolving the problem .
What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent? Year Cash Flow 0 -$12,000 1 6,200 2 5,600 3 3,900
For the cash flows in the previous below, what is he NPV at a discount rate of zero percent? What If the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? Year Cash Flow 0 -$18,000 1 9,800 2 7,500 3 7,300.
Jean will receive $8,500 per year for the next 15 years from her trust. If a 7% interest rate is applied, what is the current value of the future payments? Describe how you solved this problem, including which table (for example, present value and future value) was used and why?
Global Pistons (GP) has common stock with a market value of $200 million and debt with a value of $100 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets. a. Suppose GP issues $100 million of new stock to buy back the debt. What is the expected return of the stoc
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $5000 on which it pays interest of 10% each year. Both companies have identical projects that generate free cash flows of $800 o $1000 each year. After paying any interest on debt, both companies use all remaining free cash flows to pay dividends each ye
Paradise Enterprises has gathered projected cash flows for two projects. At what interest rate would the company be indifferent between the two projects? Which project is better if the required return is above this interest rate? Why? Year Project(I) Project(J) Difference ----------------------------------------------------
ABC Company has the following data: Current stock price = $10 Last Dividend paid = $0.5 Required rate of return = 10 % Assume that dividend is expected to grow at a constant rate, g, in the future. Assume that the company has a strong financial conditions and it is classified with low risk. Assume rs is expec
A recent paper examined a Security Market Line analysis of eight Blue Chip stocks. The analysis determined the beta for each firm, the required return for stocks with that beta, and the currently expected return for that stock as follows: Firm Beta Required Return Currently Expected Return 1 0.9
You are building a two stock portfolio with securities ST and XY. Given the following information: - Standard deviation for stock ST = 15% - Standard deviation for stock XY = 25% - Expected return for stock ST = 18% - Expected return for stock XY = 24% - Correlation coefficient between ST and XY = 0.40 - 60% of the
Glynn Enterprises and Monroe, Inc. both produce fluid control products. Their financial information is as follows: Capital Structure Glynn Monroe Debt @ 10%................................. $1,500,000 0 Common stock, 10 pe
At a 12 percent rate of interest, using continuous compounding, which of the following three options has the highest present value: Value Now Value in 1 Year Value in 2 Years A 0 0 230 B 0 100 110 C 100
The Johns Co. and the Eversmann C0. have both announced IPOs at $40 per share. One of these is undervalued by $11, and the other is overvalued by $6, but you have no other way of knowing which is which. You plan on buying 1,000 shares of each issue. If an issue is underpriced, it will be rationed and only half your order will be
Project K costs $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its WACC is 12%, What is the projects NPV? CFt = expected net cash flow at time t = $12,000 r = the projects cost of capital or WACC N = is its life The cast outflow is $52,125