Finance Chapter 8 Essay

1.What are conversion factors? Why were conversion factors developed? How do they impact on which bond is cheapest to deliver? Under what conditions would there be no cheapest to deliver? Explain in detail.

 The table gives the supply schedules for jet-ski rides by three owners: Rick, Sam, and Tom, the only suppliers of jet-ski rides.

-Martin Industries just paid an annual dividend of $1.30 a share. The market price of the stock is $36.80 and the growth rate is 6.0 percent. What is the firm's cost of equity?

Life insurance is meant to provide funds to replace a breadwinner's to protect and support dependents. Chad and Haley are dependents, not income providers. Therefore, the purchase of life insurance is unnecessary and not recommended. The Dumonts should use the money they would spend on policies for the children to increase their own coverage.

1. (TCO 1) What is the goal of financial management for a sole proprietorship? (Points : 3)

Wikipedia's accurate definition of finance is "The activity of finance is the application of a set of techniques that individuals and organizations (entities) use to manage their financial affairs, particularly the differences between income and expenditure and the risks of their investments" http://en.wikipedia.org/wiki/Finance. I discuss the importance of keeping track and updating financial reports as well as simple bank statements. These are just some of the essentials that I believe we all as a people should acknowledge.

My manager stated that she had a fixed monthly budget of $1,800. This is a shared budget for pre-op and PACU. The actual amount spent in the current month was $2,102. The explanation given for the $302 unfavorable variance was the need for additional thermometers. There were multiple broken and non-working thermometers in both areas so this was an uncontrollable expense. The prior year's budget $1,500.

Write a two to three page paper discussing what you find interesting about this company, and whether or not you think this company will have a successful future. Get to the company 's web site, into the "investors relations" section and provide some financial highlights of your company for the past year. Indicate which stock exchange the company is listed on and what was the past 12 month rate of return (% gain or loss) to investors who bought shares of this company a year ago and sold the shares yesterday. This rate of return is called the one-year Holding Period Return, or HPR. Also state what is the most recent price of the shares on the company?

In their 2009 study, “How Do Firms Finance Their Investments? The Importance of Equity Issuance and Contracting Costs.”, Vladimir A. Gatchev and his colleagues were set on trying to determine how companies respond to changes in profits and investments and how various factors impacted financing decision. The focus was not in testing a theory but getting “a deeper understanding how investment and cash flow shocks affect a firm's financing decision.” (Gatchev, Spindt, & Tarhan, 2009)

5. The statement is accurate. If Diva Shoes hedges with either an option or a forward contract that locks the exchange rate of the Yen to 92 Yen/Dollar the EPS growth will still be above 15%. Full calculation can be shown in the attached spreadsheet.

Consider the following spot and forward rates for the yen–euro exchange rates: 
Is the euro at a forward premium or discount? What are the magnitudes of the forward premiums or discounts when quoted in percentage per annum for a 360-day year? 
Answer: The forward rates of yen per euro are lower than the spot rates.

The Capital market all over the globe experienced crisis which started in United States of America in 2007 following the collapse of subprime mortgage. The bankruptcy of Lehman Brothers in September 2008, which led to the collapse of the US capital market that later trickled to other part of the world with large organization asking for bailout and also economies requesting for same from other economies or regional unions.

Outcomes in 2013-14 were a mixed bag. The higher CAD in the first quarter of 2013-14 was financed to a large extent by capital flows; but the moderation observed in the fourth quarter of 2012-13 continued through 2013-14. The communication by the US Fed in May 2013 about its intent to roll back its assets purchases and market reaction thereto led to a sizeable capital outflow from forex markets around the world. This was more pronounced in the debt segment of FII. In the event, even though there was a drastic fall in the CAD in July-September 2013, net capital inflows became negative leading to a large reserve drawdown of US$ 10.4 billion in that quarter. FDI net inflows continued to be buoyant with steady inflows into India backed by low outgo of outward FDI in the first two quarters. In the third quarter, while there was turnaround in the flows of FIIs and copious inflows under NRI deposits in response to the special swap facility of the RBI and banks’ overseas borrowing programme, there was some diminution in the levels of other flows. This led to a reserve accretion of US$ 19.1 billion in the third quarter notwithstanding that the copious proceeds of the special swap windows of the RBI directly flowed to forex reserves of the RBI. In the fourth quarter, while FDI inflow slowed, higher outflow on account of overseas FDI together with outflow of short-term credit moderated the net capital inflows into India.

Money that can be injected into the company to create income – profits from sales

Instead of crediting the discount received account, it has been wrongly debited. To rectify this error, we need to credit discount received account to the extent of Rs.2500 (Rs.1250+ Rs.1250).