Finance question and answers for July 01, 2023
- Q The table below offers EBIT for a potential capital investmentfor Fake Company Alpha. You should be able to determine a fewthings once you consider the following:The initial investment is $12,000.Depreciation...
- Q Piedmont Printing Company has a total market value of $120million, consisting of 1 million shares selling for $60 per shareand $60 million of 9% perpetual bonds now selling at par....
- Q RWE Enterprises: Expansion Project Analysis RWE Enterprises,Inc. (RWE) is a small manufacturing firm located in the hills justoutside of Nashville, TN. The firm is engaged in the manufactureand sale of...
- Q The Cost of Capital: Cost of Retained EarningsThe cost of common equity is based on the rate of return thatinvestors require on the company's common stock. New common equityis raised...
- Q SECURITY MARKET LINEYou plan to invest in the Kish Hedge Fund, which has totalcapital of $500 million invested in five stocks:StockInvestmentStock's Beta CoefficientA$160 million0.6B120 million2.0C80 million3.9D80 million1.0E60 million2.7Kish's beta coefficient...
- Q WACCOlsen Outfitters Inc. believes that its optimal capitalstructure consists of 65% common equity and 35% debt, and its taxrate is 40%. Olsen must raise additional capital to fund itsupcoming expansion....
- Q REALIZED RATES OF RETURNStocks A and B have the following historical returns:YearStock A's Returns, rAStock B's Returns, rB2011- 15.90%- 16.50%201233.5021.20201311.2531.602014- 6.00- 8.80201534.0029.35Calculate the average rate of return for stock A...
- Q PORTFOLIO BETAAn individual has $45,000 invested in a stock with a beta of 0.8and another $30,000 invested in a stock with a beta of 2.5. Ifthese are the only two...
- Q Bohemian Apartments can be purchased for $655,000 with initialannual NOI $60,900 that is projected to grow 2.5% annually.Evaluation of the project must be completed using a discount rateof 9%. The...
- Q EXPECTED RETURNSStocks A and B have the following probability distributions ofexpected future returns:ProbabilityAB0.1(10%)(35%)0.2300.311190.319270.13247Calculate the expected rate of return, rB, for StockB (rA = 11.80%.) Do not round intermediate calculations.Round your...
- Q Stock A has a beta of 0.5, and investors expect it to return 3%.Stock B has a beta of 1.5, and investors expect it to return 5%.Use the CAPM to...
- Q Midland Petroleum isholding a stockholders’ meeting next month. Ms. Ramsey is thepresident of the company and has the support of the existing boardof directors. All 12 members of the board...
- Q Quantitative Problem: You are given thefollowing information for Wine and Cork Enterprises (WCE):rRF = 3%; rM = 7%; RPM = 4%,and beta = 1.4What is WCE's required rate of return?...
- Q Hartford Research issues bonds dated January 1, 2016, that payinterest semiannually on June 30 and December 31. The bonds have a$22,000 par value and an annual contract rate of 12%,...
- Q The Hastings SugarCorporation has the following pattern of net income each year, andassociated capital expenditure projects. The firm can earn a higherreturn on the projects than the stockholders could earn...
- Q You buy a bond with a par value of $1000 and a coupon rate of 8%with 18 coupons remaining. You hold the bond and receive 11coupons. If the bond had...
- Q RTE Telecom, Inc. is a U.S. firm that wants to expand itsbusiness internationally. It is considering mutually exclusivepotential projects in both Germany and Mexico, and the Germanproject is expected to...
- Q Replacement Analysis St. Johns River Shipyard's welding machineis 15 years old, fully depreciated, and has no salvage value.However, even though it is old, it is still functional asoriginally designed and...
- Q 4. Make an amortization table for a plain vanilla CPM fullyamortizing with the following terms. 30 year monthly payments 4.5%Interest rate $1,000,000 initial loan amount. a. How much interestis paid...
- Q Modern Artifacts can produce keepsakes that will be sold for $60each. Nondepreciation fixed costs are $2,200 per year, and variablecosts are $30 per unit. The initial investment of $4,000 will...
- Q Question A [AR1: 5 Marks]Consider the projects described in the table below:End of YearProject A Cash Flow ($)Project B Cash Flow ($)0$–90,000 $–90,000 117,000 0 217,000 0 317,000 0 417,000 0 517,000 0 617,000 34,000 717,000 34,000 817,000 34,000 917,000 34,000 1017,000 90,000 Both projects have an appropriate risk adjusted discount rate...
- Q A gold mining firm is concerned about short-termvolatility in its revenues. Gold currently sells for $1,620 anounce, but the price is extremely volatile and could fall as low as$1,500 or...
- Q Bond value and timelong dash Constant required returns???PecosManufacturing has just issued a 15 ?-year, 15 ?% coupon interest?rate, ?$1000 ?-par bond that pays interest annually.??The requiredreturn is currently 14 ?%,...
- Q Dinklage Corp. has 9 million shares of common stock outstanding.The current share price is $81, and the book value per share is $7.The company also has two bond issues outstanding....
- Q 4. Draw a time line showing the cash flows fora bond that has a four year maturity, semiannual coupon payments, acoupon rate of 5 percent, and a par value of...
- Q The table below offers EBIT for a potential capital investmentfor Fake Company Zeta. (This same project will be used for all ofyour FMC #3 work.) You should be able to...
- Q The table below offers EBIT for a potential capital investmentfor Fake Company Zeta. (This same project will be used for all ofyour FMC #3 work.) You should be able to...
- Q Sadik Industries must install $1 million of new machinery in itsTexas plant. It can obtain a bank loan for 100% of the requiredamount. Alternatively, a Texas investment banking firm thatrepresents...
- Q At the same interest rate, which of the following five-yearsecurities will have the lowest durationA Treasury note.A Treasury bond.A car loan.A simple load.A zero-coupon bond.
- Q In 2005, Keenan Company paid dividends totaling $ 3,600,000over a net profit of $ 10.8 million. It was a normal year and inthe last 10 years, profits grew at a...
- Q Bird's Eye Treehouses,Inc., a Kentucky company, has determined that a majority of itscustomers are located in the Pennsylvania area. It therefore isconsidering using a lockbox system offered by a bank...
- Q (Calculate with Excel only) Consider Bob, who justturned 18 years old and is about to embark on a four-year degreeprogram. The tuition for the course is $20,000 per year. Bobcurrently...
- Q A project has annual cash flows of $5,000 for the next 10 yearsand then $10,500 each year for the following 10 years. The IRR ofthis 20-year project is 13.66%. If...
- Q a. MF Corp. has an ROE of 15% and a plowbackratio of 40%. If the coming year's earnings are expected to be $3per share, at what price will the stock...
- Q Carla Vista Inc., management is expecting a new project to startpaying off, beginning at the end of next year. Cash flows areexpected to be as follows:012345$421,676$469,452$482,455$465,326$527,444If Carla Vista can reinvest...
- Q (Calculating the geometric and arithmetic average rate of?return)??The common stock of the Brangus Cattle Company had thefollowing? end-of-year stock prices over the last five years andpaid no cash? dividends:TimeBrangus cattle...
- Q QUESTION 5In calculation of time value of money, the interest rate has a_________ relationship to the present value and _________relationship to the future value of an investment. positive; negative negative; negative negative; positive positive;...
- Q 7. Problem 12.09Click here to read the eBook: Analysis of an Expansion ProjectNEW PROJECT ANALYSISYou must evaluate a proposal to buy a new milling machine. Thebase price is $156,000, and shipping...
- Q A borrower takes out a 30-year mortgage loan for $250,000 withan interest rate of 6% and monthly payments. What portion of thefirst month's payment would be applied to interest? ($1250)...
- Q 4. (4pts) A $10,000 par value 10-year bond with 8% annualcoupons is bought at a premium to yield an annual effective rate of6%. Calculate the interest earned and the amount...
- Q 1. A corporate bond has 20 years to maturity, par value of$1,000, and pays interest semiannually. The quoted coupon rate is8%, and the bond is priced at $950. The bond...
- Q SHOW YOUR WORK, DO NOT USE EXCELConsider a portfolio consisting of the following two assets: ?Stock A has E[RA] = 10% and ?? = 20% ? Stock B has E[RB]...
- Q A bond has payments of $100 in one year, $100 the followingyear, and then $1,100 the year after that. If the discount rate is6%, what is the Macaulay Duration of...
- Q The most likely outcomes for a particular project are estimatedas follows:Unit price: $ 70Variable cost: $ 50Fixed cost: $ 300,000Expected sales: 40,000 units per yearHowever, you recognize that some of...
- Q The risk-free rate of return is 9.0%, the expected rate ofreturn on the market portfolio is 14%, and the stock of XyrongCorporation has a beta coefficient of 2.0. Xyrong pays...
- Q Click here to read the eBook: Analysis of an ExpansionProjectNEW PROJECT ANALYSISYou must evaluate the purchase of a proposed spectrometer forthe R&D department. The base price is $290,000, and it...
- Q Problem 8-4 Exponential Moving Averages (LO4, CFA1) The tablebelow shows the closing monthly stock prices for IBM and Amazon.Calculate the exponential three-month moving average for bothstocks where two-thirds of the...
- Q ?The? High-Flying Growth Company? (HFGC) has been growing veryrapidly in recent? years, making its shareholders rich in theprocess. The average annual rate of return on the stock in the lastfew...
- Q Problem 8-3 Simple Moving Averages (LO4, CFA1) The table belowshows the closing monthly stock prices for IBM and Amazon.Calculate the simple three-month moving average for each month forboth companies. (Input...
- Q Pound Industries is attempting to select the best of threemutually exclusive projects. The initial investment and? after-taxcash inflows associated with these projects are shown in thefollowing table.Cash flowsProject AProject BProject...
- Q You are evaluating a capital project for equipment with a totalinstalled cost of $750,000. The equipment has an estimated life of30 years, with an expected salvage value at the end...
- Q Excelsior Company is evaluating the proposed acquisition of anew production machine. The machine's base price is $260,000, andinstallation costs would amount to $28,000. An additional $10,000in net working capital would...
- Q Broussard Skateboard's sales are expected to increase by 15%from $7.8 million in 2018 to $8.97 million in 2019. Its assetstotaled $2 million at the end of 2018.Broussard is already at...
- Q A firm has two mutually exclusive investment projects toevaluate. The projects have the following cash flows:TimeCash Flow XCash Flow Y0-$90,000-$75,000135,00030,000260,00030,000370,00030,0004-30,0005-10,000Projects X and Y are equally risky and may be repeatedindefinitely....
- Q At year-end 2018, Wallace Landscaping’s total assets were $2.12million, and its accounts payable were $395,000. Sales, which in2018 were $2.5 million, are expected to increase by 25% in 2019.Total assets...
- Q Maggie's Muffins Bakery generated $4 million in sales during2018, and its year-end total assets were $2.4 million. Also, atyear-end 2018, current liabilities were $1 million, consisting of$300,000 of notes payable,...
- Q One year ago, Super Star Closed-End Fund had a NAV of $10.23 andwas selling at a(n) 15% discount. Today, its NAV is $11.72 and itis priced at a(n) 6% premium....
- Q (Calculating MIRR) OTR Trucking Company runs a fleet of?long-haul trucks and has recently expanded into the? Midwest, whereit has decided to build a maintenance facility. This project willrequire an initial...
- Q 20172018Sales$ 785COGS460Interest35Dividends17Depreciation210Cash7075Accounts receivables563502Accounts Payable390405Inventory662640Long-term debt340410Net fixed assets1,6801,413Common stock700235Tax rate35%35%Calculate the EBIT42690535115Calculate the net income49605246Calculate the cash flow fromoperation-226194238360Calculate the cash flow frominvestment57485-4398Calculate the cash flow fromfinancing518-412378-552
- Q Kristin is evaluating a capital budgeting project that shouldlast for 4 years. The project requires $150,000 of equipment. Sheis unsure what depreciation method to use in her analysis,straight-line or the...
- Q 1. Assume you purchased 1,000 shares of Motorola on January 2,2001 (a Tuesday) at $100 per share. Your broker charged acommission of 1% of the value of the trade.a. How...
- Q Broussard Skateboard's sales are expected to increase by 15%from $7.6 million in 2018 to $8.74 million in 2019. Its assetstotaled $5 million at the end of 2018.Broussard is already at...
- Q Assume you have the following portfolio.STOCKSTOCK WEIGHTBETAApple39 %1.58Green Mountain Coffee22 %1.39Disney27 %1.18Target12 %1.29What is the portfolio's beta?
- Q ProjectInitial OutlayY1Y2Y3Y4Y5A-450505050200150B-8502505010050010Projects are independent. No specific budget. The cost ofcapital is 10.9%. What project or projects should beaccepted based on the IRR?A.Project BB.BothC.Project AD.Neither
- Q Broussard Skateboard's sales are expected to increase by 25%from $9.0 million in 2018 to $11.25 million in 2019. Its assetstotaled $5 million at the end of 2018. Broussard is already...
- Q Faleye Consulting is deciding which of two computer systems topurchase. It can purchase state-of-the-art equipment (System A) for$24,000, which will generate cash flows of $7,000 at the end ofeach of...
- Q In purchasing a house that is worth $175,000, you need to obtaina mortgage. Suppose you choose a 30year fixed rate mortgage with aninterest rate/year of 9.74%. What is the annual...
- Q Pepsi’s mean return over the last 5 years is 19% whileMcDonald’s is 14%. Their respective standard deviations are 21% and18%. The two stocks correlation coefficient is -.20.Calculate the portfolio mean...
- Q Federal government deficit financing may have a very greatinfluence on monetary and credit conditions. Explain.
- Q Quad Enterprises is considering a new three-year expansionproject that requires an initial fixed asset investment of $2.94million. The fixed asset will be depreciated straight-line to zeroover its three-year tax life,...
- Q Quad Enterprises is considering a new three-year expansionproject that requires an initial fixed asset investment of $2.56million. The fixed asset will be depreciated straight-line to zeroover its three-year tax life...
- Q Dog Up! Franks is looking at a new sausage system with aninstalled cost of $502923. This cost will be depreciatedstraight-line to zero over the project's five-year life, at the endof...
- Q Richmond Rent-A-Car is about to go public. The investmentbanking firm of Tinkers, Evers & Chance is attempting to pricethe issue. The car rental industry generally trades at a 25 percentdiscount...
- Q Anna just turned 55. She is planning to retire in 10 years, andshe currently has $500,00 in her 401k fund. She assumes that shewill live 20 years past her retirement...
- Q The expected return and standard deviation of a portfolio thatis 50 percent invested in 3 Doors, Inc., and 50 percent invested inDown Co. are the following: 3 Doors, Inc. Down...
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