Final exam and homeworks

You are financial analyst for the XYZ company. The director has asked you to analyze two proposed capital investments, Project A and Project B. Each project has a cost of RM 10, 000, and the cost of capital for each project is 12 percent. The project s’ cash flows are as follows: Year Expected Net Cash Flows Project A Project B 0 (10,000) (10,000) 1 6500 3500 2 3000 3500 3 3000 3500 4 1000 3500 Calculate each project’s NPV. Which project or projects should be accepted?

33 TB MC Qu. 12-82 A stock had annual returns of... A stock had annual returns of 5.5 percent, -12 percent, and 15.5 percent for the past thr of returns for this stock? 56.65% 6.94% 1.94%

how do financial analyst might Financial statement Liquidity,Working capital, Diversifica!on and Time value of mone when communica!ng informa!on to management or clients, or when relaying informa!on to inform important decisions

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The preferred stock of North Coast Shoreline pays an annual dividend of $1.70 and sells for $20.24 a share. What is the rate of return on this security? A. 5.95 percent B.7.08 percent C.8.40 percent DD. 11.90 percent DE 14.17 percent 15

Question.9. From the following information, ascertain which project is more Project A Project B Cash Inflows Probability Cash Inflows Probability 0.2 2,000 2,000 0.1 0.3 4,000 4,000 0.4 0.3 6,000 6,000 0.4 8,000 0.2 8,000 0.1

The Ajax Corporation has the following set of projects available to it: Project A B C с D E Note: All projects have equal risk. G▼ F Calculate the cumulative investment and complete Ajax's schedule of potential projects. (Hint: Ajax prioritizes projects according to their expected rates of return.) Project A B DY G E Investment Required Expected Rate of Return ($ Million) (%) 500 23.0 175 18.0 50 21.0 125 16.0 300 14.0 150 13.0 250 19.0 Investment Required Expected Rate of Return ($ Million) (%) 500 23.0 50 O $1,025 O $1,300 250 O $975 O $1,000 175 125 ▼ 300 150 ▼ 21.0 21.0 19.0 18.0 16.0 ▼ 14.0 13.0 ▼ Cumulative Funds Raised ($ Million) 250 Ajax can raise funds with the following marginal costs. Calculate the cumulative funds raised to complete the following table. Block of Funds Cost of Capital ($ Million) (%) First 250 14.0 Next 250 15.5 Next 100 16.0 Next 250 16.5 Next 200 18.0 Next 200 500 600 What is the optimal capital budget (in millions) for Ajax? 850 1,050 1,250 Cumulative…

In a financial market a stock is traded with a current price of 50. Next period the price of the stock can either go up with 30 per cent or go down with 25 per cent. Risk-free debt is available with an interest rate of 8 per cent. Also traded are European options on the stock with an exercise price of 45 and a time to maturity of 1, i.e. they mature next period. Find prices of Arrow-Debreu securities.

What's the computation for this and explanation for the solution? Thanks

13.12 You work for Bellevue Window Products. While performing an analysis for a new window prod- uct, you found a report from last year that pro- vided the following information regarding the manufacture of a similar product: annual produc- tion rate T 40,000 units; selling price = $70 per unit; fixed production cost = $240,000 per year; variable production cost = $1,700,000 per year; variable selling expenses = $96,000 per year. As a first-cut, you decide to use this information to estimate (a) the breakeven production rate per year, (b) the company's profit last year, and (c) the annual production rate that would generate a profit of $1,000,000 per year. What are your estimates?

7 find the expected payoffs for each branch and then put in normal form like this. example down below

1. Consider a wine dealer who has k bottles of wine. The dealer can sell them now (t = 0) or can store it for some time and then sell them later. The value of k bottles at t-th month is given by: Vt = ket The dealer can use the sales revenue as principal in a risk-free investment at rate r. (d) If the risk free rate is 5%, what is the optimal timing of sales?

What term do economists use to refer to the minimum amount that investors must eam on the funds they invest in a firm OA economc prot OP. 0pportunity cost Oc explicit cost OD. the nomal rate of return

b) A stock you are evaluating just paid an annual dividend of £2.50. Dividends have grown at a constant rate of 1.5% over the last 15 years and you expect this to continue. i. If the required rate of return on the stock is 12%, what is the fair present value? If the required rate of return on the stock is 15%, what should the fair value be four years from today? ii.

Please help me

State if the given statement is True/False As soom as MC starts rising, AVC also starts rising.

Which of the following statements is true about current and capital and financial acocunts? O A. Their sum equals zero B. Their sum is always negative C. Their sum is always positive D. They are unrelated

4. Here is the cash flows for Project A and Project B. Calculate the Net Present Values of Project A and Project B by using a discount rate of 40%. Year 1 2 3 st 4 5 SO 6 -400.000 30.000 110.000 400.000 100.000 130.000 30.000 Project A -400.000 -400.000 21.429 -378.571 56.122 -322.449 145.773 -176.676 26.031 -150.646 24.171 -126.474 3.984 -122.490 -400.000 300.000 250.000 180.000 20.000 40.000 10.000 Project B -400.000 214.286 127.551 65.598 5.206 7.437 1.328 -400.000 -185.714 -58.163 7.434 12.641 20.078 21.406

INR Ltd’s earnings per share next year is expected to be $2.10 and this is expected to grow at5% p.a. for the foreseeable future. Its required rate of return on equity has been estimated at 9%p.a. INR Ltd has a policy of reinvesting 40% of its earnings. The present value of INR Ltd’sgrowth opportunities is closest to:   A. $7.78.B. $8.17.C. $11.11.D. $12.11

The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400.     b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain.e) There is a business cycle expansion, so both supply and demand shifts. After the shift, thenew demand curve is given by: D = 4000 + X − 2P, whereas the new supply curve is S =2P + 200. For which values of X will the interest increase/decrease? Which values of X arein line with empirical data?