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Financial Planning

As a manager of a financial planning business you have two financial planners, Phil and Francis. In an hour, Phil can produce either one financial statement or answer 8 phone calls, while Francis can either produce 4 financial statements or answer 10 phone calls. Does either person have an absolute advantage in producing both pr

Calculating Equivalent Uniform Annual Cost: Example Problem

Please see the attached file. Your County is planning to build a park. The initial cost for the park will amount to $6,500,000. Annual maintenance and repairs will amount to: $25,000 for each of the first five years, $30,000 for each of the next ten years and, $35,000 for each of the next five years. In addition

unethical accounting practices

What are the consequences of a CPA or public accounting firm rendering an opinion based on unethical practices? How does unethical accounting behavior affect the profession? How can managers stop unethical accounting practices in the workplace?

Forecasting free cash flows: Example problem

A company forecasts the following free cash flows (shown in millions of dollars). If the weighted average cost of capital is 13 percent and the free cash flows are expected to continue growing at the same rate after Year 3, what is the Year 0 value of operations, to the nearest million? Year: 1 2 3 Free cash flow: -$20 $40 $42

Linear Programming Model

(Hospital Expansion Problem) Mt. Siani Hospital in New Orleans is a large, private, 600-bed facilty, complete with laboratories, operating rooms, and x-ray eqipment. In seeking to increase revenues, Mt. Sinai's administration has decided to make a 90-bed addition on a portion of adjacent land currently used for staff parking. Th

Value of annual cash flow

Beverly Enterprises owns a nursing home that is currently earning $2.0 million in cash flow on an annual basis, but this amount is expected to drop in the future. The nursing home has a book value of $20 million, a replacement cost of $40 million, and a current sale value of $10 million. If Beverly Enterprises has a cost of capi

Expected rate of return problem

Suppose a handbill publisher can buy a new duplicating machine for $500 and the duplicator has a 1-year life. The machine is expected to contribute $550 to the year's net revenue. What is expected rate of return? If the real interest rate at which funds can be borrowed to purchase the machine is 8 percent, will the publisher cho

Cost Plus Pricing

Document attached. Cost-Plus Pricing. Emerson Ventures is considering producing a new line of hang gliders. The company estimates that variable costs will be $325 per unit and fixed costs will be $330,000 per year. Required a. Emerson has a pricing policy that dictates that a product's price must be equal to full cost plus 6

Continuous Probablility distributions

1. For the following normal distributions with parameters as specified, calculate the required probabilities: a) &#956; &#8776; 5, &#963; = 2; calculate P( 0<x<8) b) &#956; &#8776; 5, &#963; = 4; calculate P( 0<x<8) c) &#956; &#8776; 3, &#963; = 2; calculate P( 0<x<8) d) &#956; &#8776; 4, &#963; = 3

Calculate maximum lump sum amount for future payments

Assume I won the 100 million dollars in a lottery that paid installments of 20 million dollars a year for five payments or a lump sum payment. I would get the first installment payment on the day I won the lottery and installments to follow for the next four years. Or I could take the lump sum payment the day I won the lottery.

Economics

You work for a drug manufacturing company that holds a patent on Hair Growth, the world's most effective drug for restoring hair. Your job is to analyze the pricing and investment decisions facing the firm. Your marketing group estimates that Hair Grow has the following demand curve: P = 101 - .00002Q 1. Your marginal c

Finding the Rate of Return Values

RKI Instruments manufactures a ventilation controller designed for monitoring and controlling carbon monoxide in parking garages, boiler rooms, tunnels, etc. The net cash flow associated with one phase of the operation is shown below. (a) How many possible rate of return values are there for this cash flow series? (b)

Calculate the Future and Present Value

3. You will receive $5,000 three years from now. The discount rate is 8 percent. a. What is the value of your investment two years from now? Multiply $5,000 by .926 (one year's discount rate at 8 percent). b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one year's discount ra

net effect to Microsoft's payment

8. Suppose Microsoft is paying LIBOR + 2% per annum to its lenders. If Microsoft enters into a interest rate swap with Intel to receive LIBOR+1 and pay fixed 5.9%, what will be the net effect to Microsoft's payment?

Futures and Options - Forward Rate

Help!! Please see attachment for data. Here is the question. The actual data is attached. What is the value of an FRA that promises to pay you 5.0% (compounded semi-annually) on a principal of $1 million for the six-month period starting in 18 months?

rates with continuous compounding

The 6-month, 12-month, 18-month, and 24-month zero rates are 3%, 3.5%, 3.75%, and 4% with semi-annual compounding. Q1: What are the rates with continuous compounding? Q2: What is the forward rate for the six-month period beginning in 18 months?

I need help with these problems

Please help me solve these problems. Problem The following are the information on the income statements of an Oil firm, for 2007 and 2008 (all dollar figures are in millions): 2007 Sales: $12,200.00, cost of goods sold: 72% of sales, depreciation: $850.00, additional CAPEX: $900.00, additional investment in net working ca

Managerial Decisions for Firms with Marketing Power

Antitrust authorities at the Federal Trade commission are reviewing your company's recent merger with a rival firm. The FTC is concerned that the merger of the two rival firms in the same market will increase market power. A hearing is scheduled for your company to present arguments that your firm has not increased its market p

solution to a work allocation problem

As a manager of a financial planning business you have two financial planners, Phil and Francis. In an hour, Phil can produce either one financial statement or answer 8 phone calls, while Francis can either produce 2 financial statements or answer 10 phone calls. Does either person have an absolute advantage in producing both pr

Problems with Call and Put Options

A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader's position. Under what circumstances does the price of the call equal the price of the put?

Financial Analysis

The MorTex Company assembles garments entirely by hand even though a textile machine exists that can assemble garments faster than a human can. Workers cost $50 per day, and each additional laborer can produce 200 more units per day (ie. marginal product is constant and equal to 200). Installation of the first textile m

Financial Planning

Sosa Diet Supplements had earnings after taxes of $800,000 in the year 2008 with 200,000 shares of common stock outstanding. On January 1, 2009, the firm issued 50,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 30 percent. a. Compute earnings

How the find the taxable income

Little Books Inc. recently reported net income of $3 million. Its operating income Income Statement (EBIT) was $6 million, and the company pays a 40 percent tax rate. What was the company's interest expense for the year? [Hint: Divide $3 million by (1 - T) = 0.6 to find taxable income.]

Accounting for stock dividends and stock splits

An electronics corporation's common stock is selling for $44 per share, and its common stockholders' equity is shown here. a. Show the impact of a 50% stock dividend. b. Show the impact of a 3-for-2 stock split. c. Describe how the stock market would react to each event. How would you explain the difference in reaction? P

WACC with rebalancing

A gourmet catering service has an unleveraged required return of r =&#61472;43%. The company rebalances its capital structure each year to a target of L= &#61472;0.52. T * =0.20. The owner can borrow currently at a rate of rd =&#61472;26%. What is the company's WACC? Please provide all equations used in detail

Determining Present Value of a Lease: Example Problem

If I commit to 6 annual lease payment of $100,000.00 and the first payment due immediately What is the present value of the lease is the borrowing rate is 9% and it tax rate is 35%? The lease payments are tax deductible.

how to calculate realized compound yield

I don't understand how to calculate realized compound yield. Is it the same as yield to maturity? Please see problem below. Bonds of XYZ Corp. with a par value of $1,000 sell for $950, mature in 8 years, and have a 9% annual coupon rate paid semiannually. Calculate the realized compound yield for an investor with a 2

Expected return analysis

1. Sam Tsantes has analyzed two stocks, Acme Airlines and Ajax Travel Associates. His analysis concludes that Acme has a 30% chance of producing a return of 10% and a 70% chance of producing a return of 15%. At the same time, Ajax has a 30% chance of losing 25% and a 70% chance of producing a return of 50%. If Sam invests

Current Yield and YTM

I have completed the problem but would appreciate it if someone could check my work. Thanks 9. Bonds of XYZ Corp. with a par value of $1,000 sell for $950, mature in 8 years, and have a 9% annual coupon rate paid semiannually. I used Excel for the YTM. Thanks Calculate the: i. Current yield $90 / 950 = 9.47