Jamie Lyons
Finance
W2
4-1 Questions
Annuity-A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.
Lump-sum payment- A one-time payment for the total or partial value of an asset.
Cash flow- A revenue or expense stream that changes a cash account over a given period
Uneven cash flow stream- Any series of cash flows that doesn’t conform to the definition of an annuity is considered to be an uneven cash flow stream.
4-1 problem
Solve for FV
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K.
The beta coefficient is a measure of a stock’s market risk, or the extent to which the returns on a given stock move with the stock market.
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b average stock’s beta- is equal to 1
6-1
0.8 + 1.4 = 2.2
2.2/ 2 = 1.10
1.12
6-2
k = RF + Beta(Market return - RF)
.06 + .7(.13 - .06) = 10.90%
10.90%
6-3
Required Return = Risk free Return + Beta*(Market Risk Premium)
5+1.0(6)=11%
5+1.2(6)= 12.2%
6-4
(0.1*-.5) + (0.2*-.05)+(0.4*.16)+(0.2*.25)+(0.2*.06)=0.114
11.4%
expected return= 11.40%
square root of [0.1(-.5)squared] +
[0.2(-.05)squared]+[0.4(.16)squared]+[0.2(.25)squared]+[0.2(.06)squared]
standard deviation= 26.69%
26.69% divided by 11.4 = .2669 divided by .114 coefficient of variation-= 2.34
6-9
|Stock |Investment |Beta |w |
|A |$400,000 |1.50 |10.00% |
|B |$600,000 |-0.50 |15.00% |
|C |$1,000,000 |1.25 |25.00% |
|D |$2,000,000 |0.75 |50.00% |
Finally, in order to complete a more accurate comparison between the two projects, we utilized the EANPV as the deciding factor. Under current accepted financial practice, NPV is generally considered the most accurate method of predicting the performance of a potential project. The duration of the projects is different, one lasts four years and one lasts six years. To account for the variation in time frames for the projects and to further refine our selection we calculated the EANPV to compare performance on a yearly basis.
Savings accounts – refer to accounts that promote savings among individuals while allowing them to use their funds when required. Apart from this, individuals get interests on deposits in savings accounts.
Annuities are insurance products that can provide steady retirement income.You can invest in an fixedor variable annuity that begins immediately or starts payments at a
-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?
The cash flow statement shows the amount of cash within a company. Items that affect the cash balance are listed on the statement. The first section of the cash flow statement is operating activities, which shows the cash flowing in and out of the company in relation to its business operation. The operating activities section also includes net income and the change in dollars of certain accounts listed on the balance sheet. The next section, investing activities, shows cash the company received and spent on a company's capital investments. The financing activities section shows the inflows and outflows of cash related to the company’s issued financial securities, which is also listed on the balance sheet and statement of shareholders' 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.
Most corporate financing decisions in practice reduce to a choice between debt and equity. The finance manager wishing to fund a new project, but reluctant to cut dividends or to make a rights issue, which leads to the decision of borrowing options. The issue with regards to shareholder objectives being met by the management in making financing decisions has come to become a major issue of recent times. This relates to understanding the concept of the agency problem. It deals with the separation of ownership and control of an organisation within a financial context. The financial manager can raise long-term funds internally, from the company’s cash flow, or externally, via the capital market, the market for funds
and led to it’s eventual bankruptcy filing. These included liquidity, default rate, and forms of
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We are providing below the assumptions and other calculations we used while computing the WACC and the cash flows.
Founders’ termination term is very important for Laracey because it increases the possibility that the unvested equity of the founders could be accelerated when the incoming CEO terminates them. It directly protects the benefits of the founders.
In January 2006, company-owned bottling operations were brought together to form the Bottling Investments operating group, now the second-largest bottling partner in the Coca-Cola system in terms of unit case volume.
The area in which I spent the most was definitely transportation however, this expense was an absolute necessity that I could not avoid. Being raised to be conscious about my money spending habits and to always look for a bargain was not something I could necessarily put into practice concerning this area. Areas where I spent the least would have to be personal care and personal extras; there is always a great sale and or off brand personal hygiene product to be bought. When I don’t buy the flashy product with the pretty packaging and well known name I save a bit of money in the process. The fact of saving money on products like these is so liberating and I get a huge adrenaline rush out of it! As far as
What type of financial investments would you invest in if you were given 10,000 dollars, what made you choose these investments, as well as; how did your choices affect your decision as to tracking these financial investments through the usage of financial strategies and trends. While finding the right pecuniary investment to finance in is never an easy decision, one must first do their research as to what type of financial resources are available on the market to invest in; then apply those financial decisions and strategies to their financial market plan. Let’s begin with what a financial market does, “financial markets perform a vital function: they transfer funds from savers (individuals and organizations willing to defer using some