Two models, R, = 9.21+0.62t and R, =9.21+0.45t , are given for revenue (in billions of dollars per year) for a large corporation. Both models are estimates of revenues for 2007 through 2011, with t= 7 corresponding to 2007. Which model is projecting the greater revenue? How much more total revenue does that model project over the five- year period? A) The model R, projects greater revenue than R,. $9.65 billion B) The model R, projects greater revenue than R,. SES $8.65 billion C) The model R, projects greater revenue than R,. $7.65 billion D) The modelR projects greater revenue than R,. $11.65 billion E) The model R, projects greater revenue than R,. e solhou poze $17.65 billion
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- 9 A program, if implemented, will operate for 10 years for certain. Your best guess is that after year 10 and following each year thereafter there will be a 0.02 probability the program will end. Real net benefits are $25 the first year and are expected to grow 1% per year as long as the program is in operation. Benefits accrue at the end of the year. The real discount rate is 3.5%. What is the NPV of the horizon value of net benefits following year 10, as seen from time 0, the beginning of the first yearHow would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 1) The corporate tax rate is lowered. 2) The Federal Reserve tightens credit. 3) The firm uses more debt; that is, it increases its debt ratio 4) The dividend payout ratio is increased.Please do your own work, don't copy from the internet Q6) Cash flow (LO12-2) Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 24 percent tax bracket. Compute its cash flow using the following format: Earnings before depreciation and taxes _____ Depreciation _____ Earnings before taxes _____ Taxes @ 24% _____ Earnings after taxes _____ Depreciation _____ Compute the cash flow for the company if depreciation is only $20,000. How much cash flow is lost due to the reduced depreciation from $40,000 to $20,000?
- Suppose that, holding yield constant, investors are indifferent as to whether they hold bonds issued by the federal govemment or bonds issued by state and local governments (that is, they consider the bonds the same with respect to default risk, information costs, and liquidity) Suppose that state governments have issued perpetuities (or consoles) with $78 coupons and that the federal govemment has also issued perpetuities with $78 coupons. If the state and federal perpetuites both have after-tax yields of 8%, what are their pre-tax yields? (Assume that the relevant federal income tax rate is 31.13%) * The pre-tax yield on the state perpetuity will be______________% * The pre-tax yield on the federal perpetuity will be_______________%The Financial Markets proficiency has been more inclined to interest rates productssuch as loans and term deposits in Zambia than structured products. With the adverseeconomic repercussions that countries, including Zambia experienced during theoutbreak of COVID-19, the market has moved to structured products provision such asoptions, forwards, to mention but a few. The implementation of risk mitigation strategicby most companies made the financial market to enhance structured products that aresuitable to hedge all risks arising from investments and business operations.Assuming Zambeef employees you as the Investment Hedging Director to manage theinvestment in Zambia, you approach your bank, Standard Chartered Bank to structurean option to help hedge Zambeef future shares transactions. You enter into a 5 yearscall option contract at an exercise price of K350 and paid option premium amounting toK50. Three years later, the company has an increase in operational needs and decidesto assess…Refer question 1 and answer both the questios Question 1 Afrm raises capital to invest in a business project. The marginal revenue fromthe first 5 units of capital is: 1st unit has MR $1.64, 2nd unit has MR 1.41, 3rdunit has MR 1.30, 4th unit has MR 1.23, and 5th unit has MR 1.18. If the interestrate is 26%, what is the optimal amount of capital for this firm to borrow?O. 2O. 3O. 4O .5 Question 2 Consider the MR figures in Problem 1. If this firm borrows exactly 5 units ofcapital, what is the firm's total revenue?O. 6.05O. 6.76O. 6.89O. 7.14
- You have bought a car for $50,000. You were so excited. However, you then found out that the car you bought decreases in value by 8% each year. You finally decide to sell your car after 7 years. How much will your car be worth after 7 years? Explicit: a1= r= f(n)= f( )=INV 1 5aiv Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 standard deviation = 0.173687 ETFCDA : E(r)= 0.073763 standard deviation = 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 What is the standard deviation for ETFCDA?The goal of the local Agenda 21 Program was to help communities generate activities to reduce greenhouse gas emissions. According to its website, Environment Canada planned to sponsor individual and community actions to promote sustainable development and greener societies for $6 million in 1997, and $5.2 million in 1998, 1999, 2000, and 2001. a) Display each item along an appropriate timeline. b) Find the formula and compute the present value of the Agenda 21 Program in 2023 dollars (using a 5% annual discount rate), c) Suppose that this program is the only action Canada undertakes in this domain. If some economists at Environment Canada claimed that the Action 21 Program is worth undertaking, because the amount you calculated in b) is equivalent to the change in consumer surplus (in the relevant markets, say for medical care, etc.) due to living in a greener environment, would you agree or disagree with these economists? Explain.
- INV 1 5ai Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 standard deviation = 0.173687 ETFCDA : E(r)= 0.073763 standard deviation = 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 What is the portfolio expected return for ETFUS?An analyst estimates (after tax) the cost of debt capital for ABC is 3.5% and that its cost of equity capital is 5.0%. Assume that ABC’s tax rate is 21%, the risk-free rate is 2.1%, the market risk premium is 5%, the ABC market price is $85 per common share, and its dividends are $1.30 per common share. a)Compute ABC’s average pretax borrowing rate and its market beta. b)Assume that its dividends continue at the current level in perpetuity. Use the constant perpetuity DDM and the market price to infer the market’s expected cost of equity capital. c)Compare the inferred cost of equity capital from part b to the 5.0% estimated cost of equity capital from the analyst. Comment on any difference.No hand written solution and no img Consider the following information for a period of years: Arithmetic Mean Long-term government bonds 7.5% Long-term corporate bonds 7.6 Inflation 4.4 What is the real return on long-term government bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What is the real return on long-term corporate bonds? long term government bond: ? long term corporate bonds: ?