Management Information Systems

11. What is the Cost of Equity? ke = Risk Free Rate + (Beta X Risk Premium of 7.5% points). .03 + (.99 x .075) = 10.43%.

Middlesex Plastics Manufacturing had 2011 Net Income of $15.0 Million. Its 2012 Net Income is forecast to increase by 8%. The company’s capital structure has been 35% Debt and 65% Equity since 2010, and the company plans to maintain this capital structure in 2012. The company paid $3.0 Million cash dividends in 2011. The company is planning to invest in a major capital project in 2012. The capital budget for this project is $12.0 Million in 2012.

(10 points) Banana, Inc. has had debt with market value of $0.5 million that has paid a 5% coupon and has had an expiration date that is far, far away. The expected annual earnings before interest and taxes for the firm are $1 million and the firm has not grown, nor does it have plans for any growth. The firm however has just raised more equity to retire all its debt. If the required rate of return to equity-holders (after the capital structure change) is now 10%, what is the market value of the firm? Assume there are no taxes. (Enter just the number without the $ sign or a comma; round to the nearest whole dollar.) Answer for Question 8

Systematic risk or market risk is the risk that affects a large number of assets. Examples of systematic risk are inflation or increasing the interest rate, or any uncertainties in the economy but not the company 's performance. Unsystematic risk is the risk that mainly associated with specific companies or may be some competitors and suppliers. The systematic risk affects the whole market and cannot be controlled by investors. Unsystematic risk however affects the company and is controlled by the company 's performance. When investors invest money into a company they must research all aspects of that company so they are aware of the unsystematic risks they may encounter.

ABC, Inc., has 757 shares of common stock outstanding at a price of $62 a share. They also have 197 shares of preferred stock outstanding at a price of $69 a share. There are 276, 8 percent bonds outstanding that are priced at $50. The bonds mature in 16 years and pay interest semiannually. What is the capital structure

Hardwoods, Inc. is a mature manufacturing firm. The company just paid a $10 dividend, but management expects to reduce the payout by 9 percent each year, indefinitely. How much are you willing to pay today per share to buy this stock if you require a 15 percent rate of return?

| (TCO D) Find the current dividend on a stock, given that the required return is 8 percent, the dividend growth rate is 5 percent, and the stock price is $50 per share.

Like a business, individual faces also investment risk. That is the risk related to the volatility of interest rate when investing, say for example, in the 401k. This risk can be measured by standalone risk, which is the standard deviation of each security. To minimize this risk, individual needs to diversify her or his portfolio by dividing funds among securities or company stock fund and other target retirement fund. Moreover, consider investing in securities with lower interest rate of returns protect your investment from loss because they are less risky.

Information systems are both technical and social in nature. Managers must understand the relationship between the technical components of an information system and the structure, functions and work culture of. Builders of information systems should consider management objectives and decision-making as well as the impact these systems will have on the well being of the people and society. In this chapter places information systems have to be placed in the context of organizational needs at various levels of management.

3.375(1 + r)-1 + 3.375 (1 + r)-2 + 3.375 (1 + r)-3 + ...…+ 3.375 (1 + r)-40+100(1 + r)-40 = 95.6

Casino Inc. is expected to pay a dividend of $3 per share at the end of year-1 (D1) and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today?

Duchess Corporation is contemplating issuance of a 10% preferred stock that is expected to sell for its $87-per share par value. The cost of issuing and selling the stock is expected to be $5 er share.

1. Define an expert system, describe how it works, and explain its value to business

Risk is defined by an asset’s price volatility and it comes in two forms: Systematic and Unsystematic.

With the development of capital market, an increasing number of investors have a chance invest their money in the stock exchange. Investment return is the reason that the investors put their money in the stock market. However, when they spend their money in the market, they will come across the risk of the securities. In other words, investors receive the higher investment return which means they will come across the greater risk too. According to Reilly and Brown, risk means the uncertainty of future outcomes. For investors, higher risks might cause their lost more money. The investors have to choose the correct method of their return and risk.