An endogeneity issue in empirically testing for investment-bubble relationship is that Select one: a. Bubbles are only identifiable ex-post b. Firm investment decisions may impact bubble growth C. New shareholders are made worse off
Q: The table that follows summarises the financial performances of fo the year 2020. The information in…
A: Return on equity (ROE) is a measure of financial performance calculated by dividing net income by…
Q: in order to diversify risk, some of your clients are considering investing in south Africa economy…
A: South Africa is a country located in deep south of africa continent.South Africa economy is one of…
Q: 4. Measuring Risk: Suppose you have a risk free asset with return ry = 5%. Additionally, t whole…
A:
Q: Irade Center? 2. Explain the economic significance of the changes in stock market prices illustrated…
A: Economic significance refers to the statistical significance and economic consequences of a decision…
Q: In forming equity capital market assumption, what method AQR has used? a. A discounted cash flow…
A: B. premium build-up approach, forecasting the equity market premium
Q: You are financial analyst for the XYZ company. The director has asked you to analyze two proposed…
A: Using formula PV = FV / (1 + r)n PV = the present value, FV = future cash flow, r = the rate of…
Q: Financial decisions are concerned with which of the following? A)All of the options are correct…
A: Financial decisions are taken by the managers of the company regarding the company's finances. These…
Q: Liquidity risk is the result of a liability side issue and which of the following? 1.A cash flow…
A: Liquidity risk can be defined as the risk of incurring losses resulting from the inability to meet…
Q: CAPITAL BUDGETING can be most accurately defined as which of the following? O A. The process during…
A: Capital budgeting is a process that is used by businesses for the evaluation of major projects or…
Q: What the tax shield is ? Why it is important in terms of capital structure decision makinhg ?…
A: Long-term lending is a kind of loan which lasts longer than a year. It is expected by a company…
Q: It two companies, ABC Corporation and XYZ Corporation, are identical except that ABC has a P/E ratio…
A: P/E ratio or Price / Earning = stock price / Earning per share Higher the ratio, higher will be the…
Q: Which of the following is a component of a firm's microenvironment? O a. suppliers, customers,…
A: Macroenvironment includes the general and uncontrollable economic forces that affect the all firms…
Q: Consider a stock which pays dividends continuously at a rate propor- tional to its price. The…
A: A dividend is the dissemination of benefits by an enterprise to its investors. At the point when a…
Q: 14. A set of data with a correlation coefficient of -0.855 has a a. moderate negative linear…
A: Ans. 14. A correlation coefficient is a statistical measure that shows the linear relationship…
Q: “Risk-averse investor will never assume risk” - would you agree? Justify your stand. Also, explain…
A: Risk-averse: Risk-averse individuals are those who will avoid taking risks, that is if there are…
Q: |- You have the opportunity to invest in one of two companies. Company X has fixed cost of $10 000…
A: Company x fixed cost = 10,000,000 variable cost = 5/unit Company y fixed cost = 6,000,000 variable…
Q: how do financial analyst might Financial statement Liquidity,Working capital, Diversifica!on and…
A: A financial analyst is someone who offers business suggestions for an organization based on…
Q: e correlation to
A: Efficient market is a market where all of the required actual information is available to…
Q: Dividend payable is identified as _____. a. quick asset b. expense c. owner’s equity d. current…
A: The dividend is the reward to the shareholders of the company and this reward can be in the form of…
Q: share of stock of A-Star Inc. is now selling for $23.50. A financial analyst summarizes the…
A: In insights, the standard deviation is a proportion of how much variety or scattering of a bunch of…
Q: The effect of a stock dividend on the balance sheet is to: Select one: A. decrease the number of…
A: When a company pays dividends, it is paying a part of it's earnings to it's shareholders. This…
Q: Task 2 a) Calculate the market price in equilibrium for an investment that in the period before had…
A: The market price in equilibrium for an investment that in the period before had a dividend of SEK 10…
Q: Wu of Troy, New York, has $5,000 that he wants to invest in the stock market. Ji is in college on a…
A:
Q: Assume that the total industry sales is Php 100 M. The largest firm has a market share of…
A: Disclaimer :- as you posted multiple questions we are supposed to solve the first one only. The…
Q: Which one of the following assumptions of CAPM is rarely made explicit?…
A: CAPM stands for Capital Asset Pricing Model which is a simple estimate of the cost of equity.The…
Q: 12. Impact of Economic Growth. Explain how economic growth affects the valuation of a stock.
A: Economic growth: It can be defined as the increment in the gross domestic product (GDP) of an…
Q: c) Some economists argue that capital structure decisions are affected by the costs of financial…
A: Answer: When corporations are unable to pay their liabilities, they may find themself and with a few…
Q: Firms A and B are identical except for their capital structure. A carries no debt, whereas B carries…
A: "Since you have asked a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Q.1 Consider the following model Y = C+I+G C=a-bT +b(1-k)Y ; a-bī >0 G = G D=G-T-KY The above model…
A: Q.1. Given The following model Y = C + I + G C = a - bT + b(1-k)Y ; a - bT > 0. I = Ī G = G…
Q: When considering where to go to lunch, you think back to your past experiences at different…
A: Business is the activities if selling and buying the goods and services in order to make profit . to…
Q: Assume Gillette Corporation will pay an annual dividend of S$0.64 one year from now. Analysts expect…
A: D1 = 0.64 D2 = D1*(1 + g) = 0.64*1.127 = 0.7212 D3 = 0.7212*1.127 = 0.8128 D4 = 0.8128*1.127 =…
Q: Assume you can invest in 2 projects whose payoff depend on the state of the economy. The profits…
A: We have two states of recession and no recession with probability 0.5 and 0.5 each.
Q: 44- Amazon, the retail giant headquartered in the U.S, has faced severe criticisms from various…
A: Corporate Social responsibility refers to the strategies that companies put into action as part of…
Q: Abbi is a final year student in Bath Spa University doing her dissertation. After discussing with…
A: The data to determine the relationship between returns of stocks and level of risk of stocks can be…
Q: 1. Assumed a 2-period case with perfect certainty and perfect capital market. Last year your company…
A:
Q: In the field of economics, utility is a measure of how much benefit consumers derive from certain…
A: In economics, utility explains the satisfaction obtained by a consumer, while in finance, utility is…
Q: An investor is considering the following two investments.•Investment 1 has an expected rate of…
A: Variables:X1 = count of shares value of $40X2 = count of shares value of $30
Q: Provide one example of an investment option for households. Then, analyze this option based on its…
A: Investment is the process of capital formation where a minimum amount is expected in return over…
Q: There are only two (equally-likely) states of nature in this economy: boom and bust, which are…
A: Equity beta is a measure of a stock’s systematic risk. It is estimated by comparing the sensitivity…
Q: 3. Which of the following must be included in an organization’s statement of accounting profits for…
A: At the marketplace, an organization maintains variously financial statements to evaluate its…
Q: A. What are the economic factors reflected in the required rate of return? Discuss the likely…
A: Cash flow: The amount of money or money comparable which the organization gets or gives out by the…
Step by step
Solved in 2 steps
- A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various countries in whatever proportions she finds desirable. Results for a given month are contained in the following table: Country Weight InMSCI Index Manager’sWeight Manager’s Returnin Country Return of Stock Indexfor That Country U.K. 0.29 0.24 22% 15% Japan 0.42 0.2 17 17 U.S. 0.23 0.22 10 13 Germany 0.06 0.34 7 15 Required: a. Calculate the total value added of all the manager’s decisions this period. (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) b. Calculate the value added (or subtracted) by her country allocation decisions. (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount…Question: Common stock value – All growth models. Personal Finance Problem. You are evaluating thepotential purchase of a small business currently generating $40,000 of after-tax cash flow. Thecompany has $25,000 of Preferred Stock and $150,000 of debt.(FCF0 = $40,000). On the basis of a review of similar-risk investment opportunities, you must earn arate of return of Common stock value – All growth models. Personal Finance Problem. You are evaluating thepotential purchase of a small business currently generating $40,000 of after-tax cash flow. Thecompany has $25,000 of Preferred Stock and $150,000 of debt.(FCF0 = $40,000). On the basis of a review of similar-risk investment opportunities, you must earn arate of return of 9% on the proposed purchase. Because you are relatively uncertain about future cashflows, you decide to estimate the firm’s common stock value using three possible assumptions aboutthe growth rate of cash flows. 1. What is the firm's value if cash flows are expected…“Risk-averse investor will never assume risk” - would you agree? Justify your stand. Also, explain the components of return of investment.
- b) Adagio Corporation has return on equity (ROE) of 20% and its plowback ratio is p. The ROE and the plowback ratio are expected to stay the same in all future periods. The company's earnings are expected to be £4 per share next year. The cost of capital is 15%. What is the present value of growth opportunities of this corporation as a function of p? Calculate the present value of its growth opportunities for p = 30%.As and example of a possible investment restriction, an insurer mah only be allowed to invest up to 20 percent of its assets in common stock. What penalty is imposed upon the insurer that invests 30 percent of available assets in common stock?A. The additional 10 percent must be disposed of by year endB. The state regulators would impose a 10 percent fine on the insurer.C. The additional 10 percent would be a nonadmitted asset.D. The additional 10 percent would only be listed at cost.How does IRR (internal rate of return rule) differentiate from NPV (net present value rule) when deciding profitable investments? Is there a specific rule preferred or do they tend to give the same answer? Thank you so much im trying to understand them better.
- 7. Even if we can't exactly establish the actual cost of a stock out, in most cases we can still determine an appropriate level for safety stock. True FalseA share of stock of A-Star Inc. is now selling for $23.50. A financial analyst summarizes the uncertainty about the rate of return on the stock by specifying three possible scenarios: Business Condition Scenario, s Probability, p(s) End of Year Price Annual Dividend High growth 1 0.35 $35 $ 4.40 Normal growth 2 0.30 27 4.00 No growth 3 0.35 15 4.00 What are the holding-period returns for a one-year investment in the stock of A-Star Inc. for each of the three scenarios? Calculate the expected HPR and standard deviation of the HPR.Question A. How do individual companies respond to economic forces throughout the globe? One way to explore this is to see how well rates of return for stock of individual companies can be explained by stock market indexes thar reflect particular parts of the world. The table below shows monthly rates of return for two companies, Microsoft (headquartered in the United States) and China Telecom (in China), along with three indexes: the Hang Seng (Hong Kong), the FTSE 100 (London), and the S&P 500 (New York). 1. Which index most explains changes in Microsoft’s stock price? a. Run three separate regressions (one for each of the indexes) to assess the percentage changes in Microsoft stock explained by each of the three indexes. Report the adjusted r-square and p-value of the coefficient for each index. Which indexes, if any, are significant? b. Now run a single multivariate regression model with all three indexes included. Which indexes, if any, are now considered significant? Report…
- Answer these three questions about early-stage corporate finance: Why do very small companies tend to raise money from private investors instead of through an IPO? Why do small, young companies often prefer an IPO to borrowing from a bank or issuing bonds? Who has better information about whether a small firm is likely to earn profits, a venture capitalist or a potential bondholder, and why?% Return on T-Bills, Stocks And Market Index State of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Standard Deviation Coefficient of Variation Covariance with MP Correlation with Market Index Beta CAPM Req. Return Valuation (Overvalued/Undervalued/Fairly Valued) Nature of Stock (Aggressive/Defensive) Fill the parts in the above table that are shaded in yellow. Using the data generated in the previous question, plot the Security market line (SML). Superimpose…% Return on T-Bills, Stocks And Market Index State of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Standard Deviation Coefficient of Variation Covariance with MP Correlation with Market Index Beta CAPM Req. Return Valuation (Overvalued/Undervalued/Fairly Valued) Nature of Stock (Aggressive/Defensive) Fill the parts in the above table that are shaded in yellow. Show the working for the parts in yellow. Using the data generated in the previous question, plot…