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Finance Questions and Answers May 3, 2016

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Consider four different stocks, all of which have a required return of 20 percent and a most recent dividend of $3.20 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent. O percent, and --5 percent per year, respectively. Stock Z is a growth stock that will increase its
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Suppose you are the only owner of a chain of coffee shops near universities. Your current cafs are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial
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Greta has risk aversion of A = 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 5% per year, with a standard deviation of 20%. The hedge
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Intermediate financial planning Calculate exactly how much one must invest today so that one will receive $16,500 in 17 years? Funds will compound monthly and earn 9.50% Round your answer to the nearest dollar. Use commas, but NOT dollar signs. Your
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*URGENT PLEASE HELP* Net cash flowsCentral Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $50,900, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life
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Double your wealth. Kant Miss Company is promising its investors that it will double their money every 3 years. What annual rate is Kant Miss promising? Is this investment a good deal? If you invest $300 now and Kant Miss is able to deliver on its promise, how long will it take your investment to reach $34,000? Using the Rule of 72, what annual

IRR Project K costs $61,591.65, its expected cash inflows are $13,000 per year for 9 years, and its WACC is 9%. What is the project's IRR? Round your answer to two decimal places. %
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A. The stakeholder' equity section in the balance sheet of Sun Ltd. is as follows: $ Equity Share Capital: Ordinary shares of 50p each 250,000 Reserves: Share premium 250,000 Reserves: Retained Earnings 100,000 600,000 Required: Show the equity section in Sun Ltd.'s balance sheet after the actions detailed below (both actions are independent of
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Uss the table for the questionis) below. Consider the following to projects Year Yeart Year 2 Yea Year 4 Project CF CIF Alpha -79 20 25 30 35 Bcta - 80 25 26 26 25 Year 5 CIF 10 25 Year Your 7 Discount CAF Fata NA NA 154 25 25 16% Which of the following statements is correct? O A. You should invest in project Alpha since IRR Alche IRR Bea OB. You
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For an Actuarial Science course 12. Deferred Annuities You purchase a deferred annuity for $P on your 40th birthday. The annuity makes annual payments of $2000 on your birthday, starting with your 50th birthday and ending with your 70th. At an annual effective interest rate of 5%, find the price P of the annuity
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Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $36 per unit. To evaluate this offer, Troy Engines, Ltd.,
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Measurement of the dollar return on an investment is known as internal rate of return net present value compounded value O future value Question 7 (1 point) Saved When you are performing a future value analysis with semiannual compoun what must you do in your calculation? take the annual number of periods and the annual discount rate double the
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The New Century Charitable Foundation, which is tax-exempt, issued debt last year at 8 percent to help finance a new playground facility in Boston. This year the cost of debt is 15 percent higher; that is, firms that paid 10 percent for debt last year would be paying 11.5 percent this year. a. If the New Century Charitable Foundation borrowed

In the model with asymmetric information in the credit market, a decrease in the fraction of bad borrowers in the population reduces the interest rate spread. increases the default premium. hurts good borrowers. causes banks to earn negative profits.

a. The balance sheets of two major banks, Bank A and Bank B are shown below, and balances are in millions. Interest rates are forecasted to fall in the upcoming six (6) months by fifty (50) basis points. Both Bank managers have the discretion to adjust rates on their balance sheet in keeping with the forecast, plus or minus ten (10) basis points.
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TRUE OR FALSE 1. A Consumer Confidence Index of 115 reflects below-normal consumer confidence in the economy. 2. If the price of Microsoft stock increased during the quarter, the value of MSFT put options should also increase, while the value of MSFT call options should decrease. 3. Speculators use derivative markets to reduce risk while hedgers

The cost of a firm's internal common equity is always equal to the rate of return required by the firm's existing common shareholders 10% for non-financial companies 0%, because the firm does not have to pay to access its own internally generated profits the dividend yield on the firm's common stock
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You are considering an investment in Fields and Struthers, Incorporated, and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $70 million, had a tax rate of 21 percent, and its depreciation expense was $7 million. Fields and Struthers's gross fixed assets increased by $36
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You have finally saved $10,000 and are ready to make your first investment. You have the three following alternatives for investing that money A Microsoft bond with a par value of $1.000 that pays 8,75 percent on its par value in Interest, sells for $1.226.61, and matures in 19 years Southwest Bancorp preferred stock paying a dividend of $2 33 and
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plz give me answer only in 10 minute i will give u a like BI Inc. requires an equipment that costs $8,000,000 and will be utilized by the company for 5 years. The lease rental is $1,700,000 payable at the end of each year. Calculate the present value of outflow of the lease option if WDV depreciation is at 15%, the tax rate 30%, and the discount
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A company has developed a new product and has to decide whether to start full production. The marketing department has estimated that the product could sell at a price of Rs. 250 unit and achieve sales of 10000 units. Variable costs are Rs.140 per unit and fixed costs Rs. 200,000. The initial investment in the production plant would be Rs. 1000000

Eccles Inc. Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. Refer to the data for Eccles Inc.Assume that the firm's gain from leverage according to the Miller model is $126,667. If the
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To supplement your retirement, you estimate that you need to accumulate $230,000 exactly 42 years from today. You plan to make equal, end-of-year Creating a retirement fund Personal Finance Problem deposits into an account paying 6% annual interest. a. How large must the annual deposits be to create the $230,000 fund by the end of 42 years? b. If
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1-10 The Capital Allocation Line (CAL) can be described as the (a) investment opportunity set formed with a risky asset and a risk-free asset. (b) investment opportunity set formed with two risky assets. (c) line on which lie all portfolios with the same expected rate of return and different standard deviations. (d) The CAL is also called the
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The main advantage of debt financing for a firm is: D no SEC registration is required for a bond issue II) interest expense of a firm is tax-deductible III) unlevered firms have a higher value than levered firms O a. III only b. ll only O cI and III only d. I only e. clear my choice The main advantage of debt financing for a firm is: D no SEC
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The following are expected balances of selected accounts on December 31, 19X3 gathered by Balak Corporations budget director who is now in the process of preparing a master budget for the first quarter of the year 19X4. Cash 10,000 Accounts Receivable 15,000 Raw materials Inventory 18,000 Finish goods Inventory 22,000 Accounts Payable 14,000

if a firm's cost of debt D) is 10%, and tax rate is 409, then its effective cost of debt (also called after-tax cost of debt) is A 496 B. 696 3096 C None of the above D
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Consider two firms, A and B, where firm A is a potential entrant and firm B is the incumbent in the industry. They play the following sequential game: First firm A decides whether to enter (E) or to not enter (N), and then firm B decides whether to produce high (H) or low (L) output. The payoffs from the game are given in the game tree below. The
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n) Claudett's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds? A) A savings account B) A checking account C)
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The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 28% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 23% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Do not
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The total market value of Quinlan Carpets assets is $4,750,000. The total market value of all of their debt is $850,000. The capital structure of the company is made up of only debt and common equity. There are 36,000 common shares outstanding. The company has declared a 25% stock dividend, with the ex-dividend date being tomorrow. Answer the
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Problem 10-13 The Sampson Company is considering a project that requires an initial outlay of $75,000 and produces cash inflows of $20,806 each year for five years. Sampson's cost of capital is 11%. a. Calculate the project's payback period by making a single division rather than accumulating cash inflows. Round the answer to two decimal places.
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3, A bond with a coupon rate of 7% makes semiannual coupon payments on January 15 and July 15 each year. The Wall Street Journal reports the ask price for the bond on January 30 at 100.125. What is the invoice price of the bond? The coupon period has 182 days
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A $1,000 par value bond has a 5.5% coupon rate with semi-annual interest payments. The bond has 30 years to maturity and the yield to maturity is 6.2%. What is the present value? $1,101.74 $905.18 $932.28 $905.67 $600.32
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Question 12 5 pts A project has an accounting break-even point of 15,220 units. The fixed costs are $182,300 and the projected variable cost per unit is $12.87. The depreciation expense is $76,800. What is the projected sales price per unit? $40.31 O $34.07 O $38.84 $22.35 O $29.89
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Question 5 of 8 It is estimated that a quarry will have to spend R2.5 million in 8 years time on rehabilitation when it closes. Calculate the uniform series of equal payments that this quarry will have to make at the end of each year for a period of ten years in order to have saved up the R2,5 million that is required for rehabilitation. An

Case Study: The Timing of Returns or Cash flows: The Chief Financial Officer has two projects (A and B) with the same cost, but the net cash flows of each of them are different according to the table below: Time period End of year Net Cash flows: Project (A) Net Cash flows: Project (B) 1 0 2000 4000 2 4000 3 4000 2000 8000 8000 Total Net Cash
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