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    Risk Analysis

    Ratio Analysis and Evaluation

    Analyze each firm's (Bristol-Myers Squibb & Wyeth Pharmaceuticals ) financial performance for the two most recent years presented. Your analysis should include at least eight from the following list: Current ratio; Quick ratio; Average collection period (days sales outstanding); Inventory turnover ratio (if applicable); Times in

    Investment Problem Cochran Corporation

    3.) Cochran Corporation has a weighted average cost of capital of 11% for projects of average risk. Projects of below-average risk have a cost of capital of 9%, while projects of above-average risk have a cost of capital equal to 13%. Projects A and B are mutually exclusive, whereas all other projects are independent. None of th

    Dividend Policy II

    For each of the following four groups of companies, state whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to have a relatively high or low price-earnings ratio. a. High-risk companies. b. Companies that have recently experienced a temporary

    Book Value and Fair Market Value Discussion

    We discussed cash flow in DQ1. Another measure of value is the company's assets less liabilities or shareholder's equity. We call this the book value of the firm. However the actual fair market value of the firm's assets and liabilities can be far different than the book value which has important implications for valuing a firm.

    Financial economics

    A friend in finance shows you the following two figures (see the attached file). He asks you a few facts about them. S represents the safe asset. M represents the market portfolio. a) What is the name of the line segment between S and M in Figure 1? b) What is the name of the line segment between S and M in Figure 2? c) How c

    Capital Market Line

    A portfolio that combines the risk-free asset and the market portfolio has an expected return of 25 percent and a standard deviation of 4 percent. The risk-free rate is 5 percent, and the expected return on the market portfolio is 20 percent. Assume the capital-asset-pricing model holds. What expected rate of return would a secu

    Value of Bonds

    8. The Bonds of Microfood, Inc. carry a 10% annual coupon, have a $1,000 face value, and nature in 4 years. Bonds of equivalent risk yield 7%. The market value of the bonds should be (assume annual compounding): a. $1,011.20 b. $1,087.25 c. $1,095.66 d. $1,101.62 e. $1,160.25

    cost of capital explanation

    I would be grateful for an explanation to the attached problem. Companies A and B have the same business risks and are both solely financed by equity. The retention ratio for A is 60%, while that for B is 40%. The firms are identical in all other respects, and share the following characteristics: · current earnings £37

    Suppose that the following Social Security reform became law

    Suppose that the following Social Security reform became law: All current Social Security recipients will continue to receive their benefits, but no increase will be made other than cost-of-living adjustments; U.S citizens between age 40 and retirement not yet on Social Security can opt to continue with the current system: those

    Yield on an 8-year corporate bond

    Real risk-free rate of interest is 2%. Market expects that inflation will 3% each year for the next 5 years. Average 5% a year following Maturity risk premium is estimated to be MRPt = 0.1(t - 1)%. In other Maturity risk premium on a 2 year security is 0.1 %. 10 year corporate bond yields 8.6%. What is the yield on a

    Yield on a Treasury Bond

    The market expects that inflation will be 3% percent each year for the next 5 years and then the following years will average 5% percent a year. The maturity risk premium is estimated to be MRPt = 0.1(t - 1)%. Maturity risk premium on a two year security is 0.1 percent or 0.001. Real risk-free rate of interest is 3%

    Real risk-free rate of return: Example problem

    30-day T-bills are currently yielding 8 percent. Current interest rate premiums: Inflation premium: 5% Liquidity premium: 1% Maturity risk premium: 2%: Default risk premium: 2% Calculate the real risk-free rate of return.

    Management

    Consider the role of the finance department at Strident Marks. The finance department has a couple of new hires, and the CFO has asked that you spend a short amount of time with them, catching them up on some areas that are very important to the company at this time. These also happen to be areas for which Strident Marks does no

    total risk of the portfolio

    Two securities, A and B, with standard deviation of 30% and 40%, respectively. Calculate the standard deviation of a portfolio weighted equally between two securitites if their correlation is: 1. 0.9 2. 0.0 3. -0.9 And Henry's portfolio is composed of three securities with the following characteristics: Security A

    Outsourcing

    In view of all of microeconomic concepts such as competition, markets vs Cental Command, Coarse's theorm, hidden costs, allocative efficiency, and market forces, why would it make sense to outsource a function such as human resource management?

    Dividend Policy for Different Groups of Comapnies

    Dividend Policy. Here are several assertions about typical corporate dividend policies. Which of them are true? Write out a corrected version of any false statements. a. Most companies set a target dividend payout ratio. b. They set each year's dividend equal to the target payout ratio times that year's earnings. c. Managers

    Corporate Finance

    Question 1: Assume there are two companies operating in the same industry. The two companies are almost identical. The only difference is their capital structure. Company UU has only equity while company LL has 30% of debt and 70% of equity. Further assume that both companies have the same expected net operating income of

    Capital Budgeting-payback period, discounted payback, NPV, IRR

    Question 1 Assume you have just been promoted junior financial manager of a company. You are very smart and are planning to be promoted in the next 2-2.5 years. An associate of your company shows you a project with the following cash flows. End of Year Cash Flows 0 -$100,000 1 $40,000 2 $40,000 3 $40,000 4 $40,000 5 -$

    Optimal Portfolio and Risk Averse

    Suppose that a risk averse individual has $1, and there are three assets; one safe, and two risky. The safe one yields a sure rate of return of 1. The risky ones have distribution functions F(y1) and F(y2) where assets have independent and identical distributions. Show that both risky assets have the same share in the optima

    CAPM: Returns

    The average stock market return in 20-ieth century has been 9%. Consider a security whose average return has been 7%, and whose beta is estimated at 0.5. If last year.s average market return was 7%, what would you expect the return on the security to be? Explain. If you think there is not enough information to answer the questi

    Replacement of Stocks in a Portfolio

    See the attached files. Please consider the following stocks: Price per Expected Standard Stock Share Return Deviation Correlation A $25 0.06 0.20 With B = 0.20 B $50 0.08 0.10 With C = 0.45 C $25 0.15 0.15 With A = 0.60 An investor has a $10,000 portfo

    investigating the properties of the Black Scholes model.

    Please see attached problem Option Pricing Valuing Options and investigating the properties of the Black Scholes model. The answer must be in the form of an Excel spreadsheet, with a supporting explanation to explain the working in the spreadsheet. The spreadsheet needs to show how the formulae work. It has been suggeste

    CAPM

    If a portfolio is on the capital market line, show that it is perfectly correlated with the market portfolio. Is its beta 1?

    Compensation and the Board

    Being on the Board of a company is no longer just a situation where a CEO can pack the Board with a bunch of his or her buddies from the country club (with the hope that such Board members will rubber stamp the CEO's requests). Board members are more likely to be taken to task these days for not administering the proper oversigh

    Risky Assets

    Please see the attached file for full problem description. --- Suppose that there is one safe and one risky asset and that the investor has initial wealth . Investing in the risky asset yields the total (principal plus interest) of x(1+r), where r is a random variable with density f(r), r where < 0 < . The safe asset p