The Brownian Motion is used to model the liquid assets (i.e. "cash") of our startup company Math Finance Inc. You are our company's CFO (Chief Financial Officer). The initial value of our assets is 5 (measured in tens of thousands of dollars). The drift and volatility for the first two years turns out to be 2 and 3 respectively. During the next two years, the drift and volatility was observed to be 3 and 4 respectively. What can you say about the probabilistic behavior of our assets at the end of year four? Give proper mathematic explanation. What is the probability that our assets will be worth at least $150,000?

You are running a Data Analysis Company. You predict that the earnings will grow at 2% per year forever. Your company has just announced earnings of $6.5 million. What is the present value of all future earnings if the interest rate is 9% per year? (Assume all cash flows occur at the end of the year)

Digital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars): Year 1 3 6 9 Profits: Expected Value $ 97 135 243 277 Year 1 3 6 a. Compute the coefficient of variation (V) for each time period. Note: Round your answers to 3 decimal places. 9 Standard Deviation $34 55 Yes 128 176 No b. Does the risk (V) appear to be increasing over a period of time? Coefficient of Variation

7. Consider the tape diagrams below, then answer the question that follows: 5,250 1,750 5,250 1,750 = 3,500 Which of the following problems could best be represented by the model above? You placed $4,200 in an investment account. After five years, the total amount in the account appreciated by 25%. At this point, you decided to withdraw onethird of the money in the account to move to a new investment. How much money was left in the account? b. You placed $5,250 in an investment account. After five years, the total amount in the account depreciated by 20%. It then depreciated by one-third. How much money was left in a. the account? A furniture dealer buys a sofa from his distributor for $4,200. However, he marks this price up by 20% when he sells it to you. You eventually sell the sofa for a third of what you paid for it. How much did you sell the sofa for? d. A furniture dealer sold you a sofa for 20% off of $5,250. If you eventually sell the sofa for one-third less than what you paid…

You are building a free cash flow to the firm model. You expect sales to grow from $1.6 billion for the year that just ended to $1.84 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 5 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $528 million of net PPSE. b. The company currently has $176 million of net working capital. c. The company has operating margins of 10 percent and has an effective tax rate of 30 percent. d. The company has a weighted average cost of capital of 9 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 2 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. S

The FI’s initial balance sheet is assumed to be: "Picture 1" Duration of assets is 5 years and duration of liabilities is 3 years. If the manager learns from an economic forecasting unit that rates are expected to rise from 10 to 11% in the immediate future, what is the potential loss or gain to equity holders’ net worth?

You are building a free cash flow to the firm model. You expect sales to grow from $1.6 billion for the year that just ended to $1.84 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. Assume that the company currently has $432 million of net PP&E. The company currently has $144 million of net working capital. The company has operating margins of 11 percent and has an effective tax rate of 32 percent. The company has a weighted average cost of capital of 10 percent. This is based on a capital structure of two-thirds equity and one-third debt. The firm has 2 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $

Consider the following scenario for a bank. It has $200 in reserves, $800 in loans, $400 in securities, $1200 in deposits, and S100 in debt. a) Calculate the bank's capital. b) Calculate the bank's leverage ratio. c) Suppose there is a stock market boom, so that the bank's assets increase by 2 percent. What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars? d) Suppose that, instead of stock market boom, some borrowers default on their debt so that the bank's assets decrease by 2 percent. How much is now the bank's capital? Ра... +

You are building a free cash flow to the firm model. You expect sales to grow from $1.8 billion for the year that just ended to $1.98 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 1.424488% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $540 million of net PP&E. b. The company currently has $180 million of net working capital. c. The company has operating margins of 12 percent and has an effective tax rate of 29 percent. d. The company has a weighted average cost of capital of 10 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 3 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $ +A

Use the following information for numbers 23 to 25: Corporate Valuators, Inc. is assessing the value of two companies, Capital Corp. and Earm, Inc. which projects the following net cash flows in the next five years, with its desired required rate of return. Net cash flows approximate to be its earnings also. The balance sheet of Capital Corp. and Eam, Inc. has recorded Property, Plant and Equipment of P100 million and P200 million, respectively. Operating assets are estimated at 80% and 70% respectively and the rest are considered idle. Capital Corp. 8,000,000 8,800,000 9,680,000 10,648,000 11,712,800 Required return 8% Net cash flows Net cash flows Earn, Inc. 9,600,000 10,560,000 11,616,000 12,777,000 14,055,3 6% Year 1 2 3 4 23. Using capitalization of earnings, compute for the equity value of Capital Corp. 24. Using capitalization of earnings, compute for the equity value of Eam, Inc. 25. Which company has higher equity value?