Q: I have discovered an excellent investment opportunity: I buy a computer for 10,000TL, develop softwa...
A: Calculating IRR of the investment using excel IRR function
Q: 2) see picture
A: Formula to calculate current value of the stock is: P=D1/r - g Where P is the price of the stock D1 ...
Q: Example 26a (Varying Force of Interest) A fund earns interest at a force of interest 8, =kt . A depo...
A: Future Value =Present value * (1+k)^n Where, k = rate of interest
Q: Problem #2 - Chapter 13 – Preference Ranking for Investment Projects The management of Revco Product...
A: 1. profitibility index PI=present value of future cashflowinitial investment from informations give...
Q: Sales (75,000units) P 750,000 ...
A: Degree of operating leverage = Contribution margin / (contribution margin - fixed cost) Contribution...
Q: Sales (75,000units) P 750,000 ...
A: Degree of combined leverage = Contribution /EBT
Q: Karsted Air Services is now in the final year of a project. The equipment originally cost $33 millio...
A: Original cost of equipment = $33 million Total depreciation on equipment =$33 millions * 75% = $24.7...
Q: Harmer Inc. is now a successful company. In the early days (before it became profitable), it issued ...
A: Here, The after-tax discount rate for both Harmer Inc. and its employees is 10 percent. The corporat...
Q: Is it possible for a one-year coupon bond to have a negative nominal interest rate? Explain, how?
A: YTM is that single rate which makes the worth of future cash flows and coupon amount equal to its pr...
Q: 11) see picture
A: Formulas: Horizon value = FCF3(1+g)/r - g Market value = FCF/1+R + FCF2/(1+r)^2 + FCF3/(1+r)^3 + Hor...
Q: 3) see picture
A: P0 = $24 g (growth rate) = 0.08
Q: How much would you need to deposit in an account now in order to have $2000 in the account in 5 year...
A: Given information: Future value is $2,000 Number of years is 5 Interest rate is 3%
Q: Explain the difference between the coupon rate and the required return on a bond.
A: Coupon rate : Coupon rate is the rate that is paid periodically. The coupon rate is the amount of i...
Q: 7) see picture
A: Given information: Par value of preferred stock is $100 Quarterly dividend is $1.00 Current price is...
Q: North Star is trying to determine its optimal capital structure, which now consists of only common e...
A: cost of equity = risk free rate + levered beta * market risk premium Levered Beta =Unlevered Beta *...
Q: A couple who borrow $70,000 for 15 years at 8.4%, compounded monthly, must make monthly payments of ...
A: remaining balance formula: remaining balance=pv×1+rmn-pmt×1+rmn-1rm where, pv =principal PMT = month...
Q: Select one: a. $1,449,334 b. 579,360 C. $115.594 d. $1,108,432 e. $147.332
A: interest rate =9.25 semiannual =4.625 Period =15 years Period =30 semiannual Present value FACTOR ...
Q: Oleck Inc. produces stereo components that sell at P = $100 per unit. Oleck’s fixed costs are $200,0...
A: Break-even point is the point at which there is no profit and no loss. At this level of sales, total...
Q: A two-year bond with par value $1,000 making annual coupon payments of $100 is priced at $1,000. Wha...
A: a) Computation of realized compound yield to maturity when the interest rate is 8%:Total proceeds=$1...
Q: You are trading in a market in which you know there are a few highly skilled traders who are better ...
A: The question is based on the concept of efficiency of investment and portfolio . A better informed i...
Q: a. What was the total cost to Douglas? Total cost b. If Douglas had $450 in his pocket, what does he...
A: The money value at which any good/service is available to consumers is known as Sales Price. It is t...
Q: Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,050. The first...
A: YTM is the rate of return if bond are held till maturity.
Q: Assume it is now January 1, 2000, and someone offers the following deal: starting from year 2000, yo...
A: The present value of the annuity will be PV = 20001.1 + 20011.12 + 20021.13 + … + 3000 1.11001If...
Q: Olympic Sports has two issues of debt outstanding. One is a 4% coupon bond with a face value of $34 ...
A: Formula for Before tax cost of debt: Before tax cost of debt = WA*rA + WB*rB After tax cost of debt ...
Q: Are the shareholders of Firm T better off with the cash offer or the stock offer? Cash offer is bett...
A: The ratio in which the shares of the one firm will be exchanged for the shares of other firm, it is ...
Q: Consider a simple firm that has the following market-value balance sheet: Assets Liabilities & Equit...
A: Hey, since there are multiple subpart questions posted, we will answer the first three questions. If...
Q: the bond. If the current one-year interest rate on government bonds is 8 percent, then the price Tal...
A: Time Period = 2 years Face Value = 5000 Coupon = Coupon Rate * Face Value = 6%*5000 = 300 Interest R...
Q: 1. DPCL is a small-sized firm manufacturing hand tools. Its manufacturing plant is situated in Sohar...
A: NPV computes the existing value of future benefits by discounting future cash flows with a given int...
Q: 7) see picture
A: Formula to calculate stock value per share: Market value/No of outstanding shares Formula for Market...
Q: An upward sloping yield curve is a(n) _______ yield curve. A. humped B. inverted C. normal D. flat ...
A: An upward sloping yield curve is a(n) NORMAL yield curve.
Q: How long will it take my money to double at 7% p.a. compounded semi-annually? a About 10 years b. Ab...
A: Given data; 2 * Present value of money = future value of money FV / PV = 2 Interest rate = 7% compou...
Q: Bartlett Company's target capital structure is 40% debt, 15% preferred, and 45% common equity. The a...
A: Weighted Average Cost of Capital : It is average cost of capital of all capital on the basis of weig...
Q: A stock has an expected return of 13.2% , the risk free rate is 3.5%. Market risk premium is 7.5%. W...
A: As per CAPM, Expected Return = Risk free rate + beta * Market risk premium
Q: Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T...
A: Since there are two options for the firm to carry out, either in cash offer or either through share ...
Q: A firm is considering a nine-year project that requires an initial investment in fixed assets of $63...
A:
Q: Q.What is the advantage of an ETF relative to open-end and closed-end investment company? ____ A) In...
A: ETF has quite advantages over open ended and closed ended investment company.
Q: 5) Yawl Inc. must choose between two business opportunities. Opportunity 1 will generate RO40,000 be...
A: After tax cashflow = Before tax cashflow - tax cost
Q: Suppose you put $1000 in an account today and you need to have $6727.5 in the future. If the bank p...
A: Future value = Present Value * (1+ rate )^ n Where, r = rate of interest n = no. of compounding per...
Q: State of economy Probability Rate of returns Stock A Stock B Stock C Boom 0.35 0.24 0.36 0.5...
A: Working note:
Q: Suppose that the prices of zero-coupon bonds with various maturities are given in the following tabl...
A: Note : As per the bartelby guidelines only first two parts of the question will be answered. Part A...
You have recently been appointed as the investment analyst of Investalot (Pty) Ltd.
You are given a table with a list of companies, their stocks and their possible payoffs
for every rand invested as follows:
Stock Year 1 (R) Year 2 (R) Year 3 (R)
Discovery Ltd 0.8 0.2 0.1
Foschini Group Ltd 0.7 0.75 0.55
Famous Brands Ltd 0.4 0.15 0.75
Required:
Using the Minimax regret method choose the stock that will minimise your
maximum regret.
Minimum regret can be arrived at by:
Regret = Best pay off - Payoff received
Step by step
Solved in 2 steps
- Imagine yourself as a financial manager in a company, and you are requested to provide a financial report including the calculation of the current market rate of return from the investor's perspective for each of the four investment options, taking into consideration the followings: Common stocks available for investment are: 2,500,000 shares of common stock, with a par balance of $1 per share. The current market value of the common share is $24.43 per share. Annual earnings per share $1.95. Bonds available for investment $1,750,000 bonds (A) with an interest of 6.25%, with a current market value of $104 per bond (price of $104 per $100). $2,250,000 Notes B, with an interest rate of 5.75%, with a current market value of $94.50 (price $94.50 per $100 note). The corporate tax rate is 35%. Preferred shares available for investment 950,000 outstanding preferred shares with a par value of $10 with a preferential dividend payment…I need an answer for this specific question please LCT Computers is listed on the Alternative Investment Market (AIM) at the London Stock Exchange. The current market price of their shares is £80 per share. Last year they paid a dividend of £4 per share. This year they plan to pay £4.20 and expect the dividend to grow by 1.39% in the foreseeable future as it did between last year and this year. The finance director of LCT Computers has also collected some information from the market that suggests the treasury rates in the United Kingdom are currently 1.5 percent and the market return is estimated to be 9.5 percent. His calculations also suggest that Brian Computers has a beta of 0.9. What will be the cost of equity for Brian Computers using: the Constant Dividend Growth Model? the Capital Asset Pricing Model?The following information relates to five stocks listed in five different sectors at the Nairobi Securities Exchange .The return on treasury bills is 4% and the average return in the market has been found to be 10% Estimated Return(%) Beta Sasini Ltd 8 0.7 Stanbic Holdings 6.2 1 Scan group Ltd 15 1.2 Crown Paints Kenya 10.5 1.4 Sanlam Kenya PLC 13 -0.4 Required: Using the capital asset pricing model (CAPM) determine the Required Rate of Return (RRR) for each stock and state whether it is undervalued, overvalued or fairly valued.
- Your client wishes for you to evaluate the current structure of Homestarter Ltd. (a small investment company) in an aim to identify the current returns required for the company. This company has the following balance sheet and details: (picture) Notes: The company’s bank has advised that the interest rate on any new debt finance provided for the projects would be 7% p.a. if the debt issue is of similar risk and of the same time to maturity and coupon rate. There are currently 150,000 preference shares on issue, which pay a dividend of $1.30 per year. The preference shares currently sell for $8.20. The company’s existing 600,000 ordinary shares currently sell for $2.85 each. You have identified that Homestarter has recently paid a $0.28 dividend. Historically, dividends have increased at an annual rate of 3% p.a. and are expected to continue to do so in the future. The company’s tax rate is 25%. Your client wishes to understand, with the use of workings, the following aspects of…The investment banking firm of Stan Inc. will use a dividend valuation model to appraise the shares of the DB Corporation. Dividends (D) at the end of the current year will be P1.20. The growth rate (g) is 9% and the discount rate (K) is 13%?The attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends. The risk-free rate on long-term Treasury bonds is 8.04%. Assume that the market risk premium is 6%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.
- GPS Inc. wishes to estimate its cost of retained earnings. The firm's beta is 1.21. The rate on 6-month T-bills is 0.036, and the return on the market portfolio index is 0.119. What is the appropriate cost for retained earnings in determining the firm's cost of capital? Instruction: Type your answer as a decimal, and round to three decimal places.You are the new CFO of Risk Surfing Ltd, which has current assets of$ 7 920, net fixed assets of $17 700, current liabilities of $4 580 and long term debts of $5 890. Required: Calculate owners’ equity and build a balance sheet for the company? How much is net working capital of the company? Calculate the return on assets of the company given that Return on Equity is 30%? What is the PE of the company if total number of ordinary shares outstanding is 2000 and market price of each share is $12?You are an investment manager at Securities Investment Plc., and you are advising the management of Microprocessors Limited, a manufacturer of microchips, on its capital structure. The following information is available to assist with your assessment. The firm: i. issued 10% preferred share which sold for $100 per share par value. The cost of issuing and selling the stock was $2 per share. ii. has common share with a market price of $25 per share and an expected dividend of $2 per share at the end of the coming year. Growth rate in dividends has been 5%. iii. can borrow funds by selling $1,000 par value at 10% coupon interest rate, 10-year debt. To sell securities, an average discount of $30 per bond is given. Assume that the tax rate is 35%. iv. has the following capital structure which it considers optimal. Type of Capital Book Value $ Long term debt 3 000 000 Preferred stock 500 000 Common stock 1200 000 Total $4 700 000 A. Determine the: i. Before- and after-tax cost of debt (4…
- The attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends. If you formed a portfolio that consisted of 60% Goodman stock and 40% Landry stock, what would be its beta and its required return?You are an investment adviser. One of your clients approaches you for your advice on investing inequity shares of Theta Company. You have collected the following data:Earnings per share last year $6.00Payout ratio 0.40Return on equity 0.30Cost of equity capital 0.20The company plans to increase the payout ratio to 60% from year 5.Required:i) Estimate the price of an equity share of this company using an appropriate dividenddiscount model and advise your client whether they should buy a share of the company.ii) Your client is keen to know whether there are any growth opportunities from theirinvestment. Explain to your client the meaning of this concept using appropriatecalculations.iii) If there are positive or negative growth opportunities, explain the reason for suchopportunities.You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $36.00 million in assets with $33.00 million in debt and $3.00 million in equity. LotsofEquity, Inc. finances its $36.00 million in assets with $3.00 million in debt and $33.00 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) LotsofDebt, Inc. = ___.__% LotsofEquity, Inc. = ___.__% Calculate the equity multiplier. (Round your answers to 2 decimal places.) LotsofDebt, Inc. =______ times LotsofEquity, Inc. = ______ times Calculate the debt-to-equity. (Round your answers to 2 decimal places.) LotsofDebt, Inc. =______ times LotsofEquity, Inc. = ______ times