The Net Present Value (NPV) of the J-Mix 2000 for Caspian Sea Drinks is $844,474. This value is calculated by taking the present value of the future cash flows of the machine and subtracting the cost of the machine.
The present value of the cash flows are calculated by discounting the future cash flows by the cost of capital. In this case, the cost of capital is 11.61% and the future cash flows are $519,442 for each of the next five years. Subtracting the cost of the machine, $1.07 million, from the present value of the cash flows yields a net present value of $844,474.
This means that if Caspian Sea Drinks purchases the J-Mix 2000, they will increase the value of the company by $844,474. This value is calculated by taking the present value of the future cash flows of the machine and subtracting the cost of the machine.
In this case, the cost of capital is 11.61% and the future cash flows are $519,442 for each of the next five years. Subtracting the cost of the machine, $1.07 million, from the present value of the cash flows yields a net present value of $844,474.
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what are the goals of monetary policy? maximum employment and stable prices zero unemployment and stable prices zero unemployment and zero inflation maximum employment and zero inflation
The goals of monetary policy are to achieve maximum employment and stable prices in the economy. This is typically done through adjustments in the money supply and interest rates.
The objective is to create conditions that support sustainable economic growth while keeping inflation under control. While achieving zero unemployment and zero inflation may be desirable, it is not always feasible as there are always factors that can affect the economy and create fluctuations in employment and prices.
Therefore, the primary goals of monetary policy are to achieve maximum employment and stable prices, with the understanding that some level of inflation and unemployment may still exist.
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If a company were to sell an asset and it resulted in a capital gains, the company would owe tax on the amount the financial gain. True False
If a company were to sell an asset and the sale resulted in a capital gain, the company would owe tax on the amount of the financial gain. The given statement is true.
Capital gains tax is a tax on the profits earned from the sale of a non-inventory asset, such as property or investments, that have been held for more than a year. The amount of tax owed on the capital gain is typically calculated based on the net gain from the sale, which is the difference between the selling price and the asset's cost basis.
However, there may be certain exemptions or deductions available to the company that can reduce the amount of tax owed.
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a)The following balance sheet relates to XYZ ltd for the period ended 31ST December 2018
Sh. ‘000’ Sh. ‘000’
Non-Current Assets 32,500
Current Assets 42,875 75,375
Financed by:
Liability and owner’s Equity 12,500
18% Debentures (Shs. 1000 par) 16,000
10% Preference Shares 6,250
Ordinary Shares (Sh. 10 par) 12,500
Retained Earnings 28,125 75,375
Additional Information;
The debentures are now selling at Sh. 950 in the market and they will be redeemed 10 years from now
By the end of the last financial period, the company had declared unpaid sh. 5 per share dividends. Dividends are expected to grow at an annual rate of 10% in the foreseeable future. Currently, the company’s shares sell at sh. 38 per share in the stock exchange
Preference shares were issued in 2015 and their prices have remained the same over the years and corporate Tax rate is 30% p.a.
Compute the company’s WACC (10 Marks)
b)Highlight 4 reasons in support of cross boarder listing (4 Marks)
c)Explain 3 managerial functions of a finance manager (6 Marks)
d) Describe 3 types of partners in a partnership (6 Marks)
e)Agency costs refer to costs incurred by shareholders in trying to control management behavior and actions and therefore minimize agency conflicts. Outline 4 of those costs (4 Marks)
a) The company's WACC is 11.3%.
WACC = (E/V x Re) + ((D/V x Rd) x (1 - Tc)), where
E = market value of equity
D = market value of debt
V = total market value of the company (E + D)
Re = cost of equity
Rd = cost of debt
Tc = corporate tax rate
Using the given information, the cost of equity (Re) is 16%, the cost of debt (Rd) is 9.5% (since the debentures are selling at a discount of 5%), and the market value of equity (E) is 12,500, with a market value of debt (D) of 16,000. Substituting these values into the formula yields a WACC of 11.3%.
b) Four reasons to support cross-border listing are:
Increased visibility and access to a larger investor base
Increased liquidity and potential for better pricing of shares
Improved corporate governance and transparency
Ability to raise capital in multiple markets
Cross-border listing can provide many benefits to a company, including increased exposure to a larger pool of potential investors, improved liquidity and pricing of shares, enhanced corporate governance and transparency, and access to capital in multiple markets. Additionally, it can help diversify a company's shareholder base and reduce its reliance on a single market.
c) Three managerial functions of a finance manager are:
Financial Planning and Analysis
Investment and Capital Budgeting
Risk Management
A finance manager is responsible for overseeing a company's financial operations and making strategic financial decisions. Some of the key managerial functions of a finance manager include financial planning and analysis, investment and capital budgeting, and risk management.
These functions involve forecasting future financial performance, identifying investment opportunities and evaluating potential risks, and developing strategies to manage financial risk.
d) The three types of partners in a partnership are:
General partners - have management control and unlimited liability for the partnership's debts
Limited partners - have no management control and limited liability for the partnership's debts
Silent partners - provide capital but have no management or decision-making authority
Partnerships can have various types of partners, including general partners who have management control and unlimited liability for the partnership's debts, limited partners who have no management control and limited liability for the partnership's debts, and silent partners who provide capital but have no management or decision-making authority.
e) Four types of agency costs include:
Monitoring costs - incurred by shareholders to monitor management actions
Bonding costs - incurred by managers to signal their commitment to act in the best interest of shareholders
Residual loss - the loss that occurs when the manager's incentives are not aligned with the shareholders' interests
Opportunistic behavior - actions taken by managers to pursue their own self-interest at the expense of shareholders.
Agency costs are incurred by shareholders in their effort to monitor management behavior and actions to minimize agency conflicts. Four types of agency costs include monitoring costs, bonding costs, residual loss, and opportunistic behavior. These costs can be significant and can affect a company's financial performance and shareholder value.
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the spillage of 29,000 plastic bath toys in the middle of the pacific ocean in 1992 proved that
Ocean currents may significantly affect how marine garbage moves and is distributed, as was seen in 1992 when 29,000 plastic bath toys leaked into the center of the Pacific Ocean.
The toys, which featured red beavers, green frogs, blue turtles, and yellow rubber ducks, were unintentionally dropped from a cargo ship in the North Pacific during a storm. Toys served as a simple experiment for oceanographers to learn more about the motion and distribution of marine debris in the ocean as well as the patterns of water currents.
The incident also highlighted the need for more awareness and action to address the issue of plastic pollution in the world's seas, which is a rising concern with Improve performance.
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The spillage of 29,000 plastic bath toys in the middle of the Pacific Ocean in 1992 was a wake-up call to the world about the impact of plastic pollution. It highlighted the far-reaching and long-lasting impact of plastic waste, and the urgent need for action to address this problem.
The spillage of 29,000 plastic bath toys in the middle of the Pacific Ocean in 1992 proved the far-reaching and long-lasting impact of plastic pollution. These toys were part of a shipping container that fell overboard during a storm, and they have since traveled the world's oceans, washing up on shores thousands of miles away. This incident highlighted the problem of plastic pollution and its impact on marine life and the environment.
The bath toys, made of durable plastic, have been found in the Arctic and the Atlantic Oceans, as well as on the coasts of Hawaii, Alaska, and other countries. The spillage showed that plastic pollution is not confined to local areas, but can spread over vast distances, posing a threat to marine life and the food chain.
The toys have also shed light on the longevity of plastic in the ocean, as they have remained largely intact for decades. They have become a symbol of the environmental impact of plastic pollution, and the need for action to address the problem. The incident has led to increased awareness and efforts to reduce plastic waste, including bans on single-use plastics and initiatives to clean up the ocean.
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The quantity X tfollows an Arithmetic Brownian motion with drift 3 and volatility 2. Suppose X0 = 100. What is the probability that X1 is at least 100? Recall that for an Arithmetic Brownian motion with drift μ and volatility σ, the change in time interval τ is normally distributed with mean μτ and variance σ2τ.'
Arithmetic Brownian motion is a stochastic process that models the behavior of a variable that changes continuously over time.
It is characterized by a drift term and a volatility term, which determine the expected trend and the level of randomness in the process, respectively. In this context, the quantity X follows an Arithmetic Brownian motion with drift 3 and volatility 2, which means that X is expected to increase by 3 units per time unit on average, and the magnitude of this change is likely to be within 2 units with a certain level of uncertainty.
Given that X0 = 100, the question asks for the probability that X1 is at least 100. This can be interpreted as the likelihood that X increases or stays the same over the time interval from 0 to 1. To compute this probability, we need to use the properties of normal distribution, which is the distribution of the change in X over a time interval τ. Specifically, we can use the mean and variance of X1 - X0, which are μτ and σ^2τ, respectively, to calculate the probability that X1 is greater than or equal to 100. This involves standardizing the normal distribution using the z-score formula and finding the corresponding probability from a standard normal table or calculator.
Overall, the probability that X1 is at least 100 depends on the specific values of μ, σ, and τ, as well as the initial value X0. In this case, we can use the given parameters to compute the probability using the method described above.
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which marketing function takes on significant importance when dealing with seasonal fruits and vegetables that offer a short shelf life and selling opportunity?
The marketing function that takes on significant importance when dealing with seasonal fruits and vegetables that offer a short shelf life and selling opportunity is the function of "distribution" or "logistics."
Distribution or logistics is the marketing function that involves the planning, implementation, and control of the physical flow of products from the point of origin to the point of consumption.
In the case of seasonal fruits and vegetables with a short shelf life, it is crucial to have a well-planned and efficient distribution network that ensures the timely delivery of the products to the consumers.
The distribution function must take into account factors such as transportation, storage, packaging, and handling to ensure that the products reach the market in optimal condition. It is also essential to have a network of intermediaries such as wholesalers, retailers, and distributors who can help in the efficient distribution of the products.
Effective logistics and distribution can help in reducing wastage and ensuring that the products reach the consumers when they are still fresh, which can result in increased sales and profits. Therefore, the distribution function takes on significant importance when dealing with seasonal fruits and vegetables that offer a short shelf life and selling opportunity.
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Once the profit-maximizing output where MR = MC is determined,
price is set by
a.
subtracting the marginal cost from total revenue.
b.
the demand curve.
c.
making it equal to MR = MC.
Once the profit-maximizing with marginal cost output where MR = MC is determined, price is set by the demand curve. The correct answer is: b. the demand curve.
Once the profit-maximizing output where MR (marginal revenue) = MC (marginal cost) is determined, price is set by the demand curve. This is because the demand curve reflects the prices that consumers are willing to pay for each level of output.
To find the price at this output level, simply move vertically up from the profit-maximizing output point until you reach the demand curve. The corresponding price on the demand curve is the price at which the firm should sell its product to maximize profit.
Profit-maximizing refers to the strategy or goal of maximizing the profits of a business or organization.
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1. The preferred stock of Rail Lines, Inc., pays an annual dividend of $7.50 and sells for $50.15 a share. What is the required rate on this security?
A. 16.95 percent
B. 10.97 percent
C. 18.94 percent
D. 14.96 percent
E. 12.96 percent
The required rate of return on a preferred stock is the return that an investor expects to receive in order to compensate for the risk of investing in that stock.
To calculate the required rate on the preferred stock of Rail Lines, Inc., we need to use the dividend discount model formula, which states that the required rate of return equals the dividend divided by the price of the stock plus the growth rate of the dividend.
In this case, the annual dividend is $7.50 and the price of the stock is $50.15 a share. We don't have information about the growth rate of the dividend, so we'll assume that it's zero, which means that the dividend will remain constant over time.
Using the formula, we get:
Required rate of return = $7.50 / $50.15 + 0 = 0.1494 = 14.94%
Therefore, the answer is D. 14.96 percent.
This means that an investor who purchases this preferred stock expects to earn a return of 14.96% per year in order to compensate for the risk of investing in this stock. This return is higher than the return on a risk-free investment, such as a U.S. Treasury bond, because the preferred stock carries a higher risk of default.
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according to the matrix provided here, there is a dominant strategy in this game, which shows what each firm should do regardless of what the other firm is doing.
The computer system made it possible for the two airlines to communicate with one another, which allowed them to collaborate and coordinate their strategies.That player has an advantage over the opposition in the game, all other things being equal.
In game theory, a situation where one player possesses better tactics regardless of how their opponent may play is referred to as the dominating strategy. No matter what tactics other players use, a player's dominant strategy is the one that gives them the best results. Since admitting would reduce the average amount of time spent in prison, defecting (i.e., confessing) is the preferred choice in this situation.
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According to the matrix provided below, there is a dominant strategy in this game which shows what each firm should do regardless of what the other firm is doing.
However, in the real world, both airlines posted their planned fare cuts on a computer system that allowed each of them to see what their rival was doing. They each saw the price war starting, backed down, and escaped the prisoner's dilemma.
Which of the following is the best explanation for why the actual outcome is different from the outcome we predicted using game theory?
Based on the matrix provided, a dominant strategy refers to a strategy that is the best option for a player regardless of the other player's strategy choice. In this case, if there is a dominant strategy in the game, it means that one firm has an option that is always better than any other option regardless of what the other firm does.
Identifying a dominant strategy can help firms make better decisions in their business operations and improve their chances of success.Unfortunately, you did not provide the matrix itself. However, I can explain how to identify a dominant strategy in a game using a matrix.
1. Create a matrix (also known as a payoff matrix) that represents the possible strategies for both firms. The rows typically represent one firm's strategies, while the columns represent the other firm's strategies.
2. Examine each row and column to identify the dominant strategy for each firm. A dominant strategy is a strategy that yields a higher payoff for a firm, regardless of what the other firm chooses.
3. To find the dominant strategy for Firm A (assuming Firm A is represented by rows), compare the payoffs in each row. If one row has higher payoffs for Firm A than the other row(s), regardless of the column, that is Firm A's dominant strategy.
4. Similarly, to find the dominant strategy for Firm B (assuming Firm B is represented by columns), compare the payoffs in each column. If one column has higher payoffs for Firm B than the other column(s), regardless of the row, that is Firm B's dominant strategy.
Once you identify the dominant strategy for each firm, it shows what each firm should do regardless of what the other firm is doing. Please provide the specific matrix if you need help determining the dominant strategy for your particular game.
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5. Yield to maturity and future price
A bond has a $1,000 par value, 10 years to maturity, and a 8% annual coupon and sells for $980.
a. What is its yield to maturity (YTM)? Round your answer to two decimal places.
__ %
b. Assume that the yield to maturity remains constant for the next 2 years. What will the price be 2 years from today? Round your answer to the nearest cent.
$__
Yield to maturity (YTM) is the total return anticipated on a bond if it is held until maturity. If the yield to maturity remains constant for the next 2 years, the price be 2 years from today will be approximately $1,720.34.
(a) Yield to maturity (YTM) is the total return anticipated on a bond if it is held until maturity. In this case, the bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon rate. The bond is currently selling for $980, which means it is priced at a discount.
To calculate the yield to maturity, we need to find the interest rate that makes the present value of the bond's cash flows equal to the current market price. Using a financial calculator or spreadsheet, we can calculate that the YTM is approximately 8.26%. This means that if the bond is held until maturity, the total return will be 8.26% per year.
(b) If the yield to maturity remains constant for the next 2 years, we can use the present value formula to calculate the future price of the bond. We know that the bond has a 10-year maturity, so there will be 8 years remaining in 2 years' time. The coupon payments will remain the same at 8% of the par value, or $80 per year.
Using a financial calculator or spreadsheet, we can calculate that the future value of the coupon payments over the remaining 8 years is approximately $634.47. We also need to calculate the future value of the $1,000 par value, which is $1,085.87.
Adding these two values together, we get a future price of approximately $1,720.34. This assumes that the yield to maturity remains constant over the next 2 years.
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When do the effects of warranty obligations affect the statement of cash flows? Multiple Choice eBook Print When the sale of merchandise is made When the worranty obligation is recognized When there is a settlement of a warranty claim made by a customer None of these answer choices are correct
The effects of warranty obligations affect the statement of cash flows when there is a settlement of a warranty claim made by a customer (option c).
When a customer's warranty claim is settled, the effects of warranty obligations have an impact on the cash flow statement. This is because a warranty claim settlement involves a cash outflow to cover the cost of repairing or replacing the defective product, which is classified as an operating activity in the statement of cash flows.
Recognition of warranty obligations and sales of merchandise do not directly impact cash flows and are therefore not included in the statement of cash flows. It is important for companies to properly account for warranty obligations and their impact on cash flows to accurately reflect their financial position and performance.
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Suppose you want to buy a $1,000 par value bond that pays $27 interest each quarter and with a maturity of 7 years from now. If you require 10% rate of return with quarterly compounding, how much should you be willing to pay for this bond? (Round your answer to two decimal point)
You should be willing to pay $1,124.25 for this bond.
To calculate the present value of the $1,000 par value bond that pays $27 interest each quarter and matures in 7 years, with a required 10% rate of return compounded quarterly, follow these steps:
1. Determine the total number of periods (quarters) until the bond matures: 7 years × 4 quarters = 28 quarters
2. Calculate the required quarterly rate of return: 10% annual rate / 4 quarters = 2.5% per quarter or 0.025 in decimal form
3. Calculate the present value of the bond's interest payments (also known as the annuity portion): PV(Annuity) = $27 × (1 - (1 + 0.025)⁻²⁸)) / 0.025 ≈ $551.63
4. Calculate the present value of the bond's par value at maturity: PV(Par Value) = $1,000 × (1 + 0.025)⁻²⁸ ≈ $572.62
5. Add the present values of the annuity and par value portions to determine the total present value of the bond: $551.63 + $572.62 ≈ $1,124.25
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Consider a 5-year, interest-only loan with a 7% interest rate. The principal amount is $10,000. Interest is paid annually.
• What would the stream of cashflows be?
• Years 1 – 4: Interest payments of .07(10,000) = 700 • Year 5: Interest + principal = 10,700
The stream of cashflows for the 5-year, interest-only loan with a 7% interest rate and a principal amount of $10,000 for years 1-4 will be $700 each year and year 5, it equals $10,700.
The stream of cash flows for this loan would be as follows:
Year 1: Interest payment of $700
Year 2: Interest payment of $700
Year 3: Interest payment of $700
Year 4: Interest payment of $700
Year 5: Interest payment of $700 + principal payment of $10,000 = $10,700
For the first four years, the borrower would only need to make interest payments of $700 annually. However, in the fifth year, the borrower would need to pay off the full principal amount plus the final year's interest payment for a total of $10,700.
It is important to note that because this is an interest-only loan, the borrower would not be paying down any of the principal balance over the first four years. Therefore, the loan balance would remain at $10,000 until the final year when the borrower makes the principal payment.
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louis vuitton moet hennessy(lvmh), the well-known french luxury goods company, bought from the bulgari family a controlling 66 percent interest in bulgari spa, the italian jewelry maker. the value of the purchase consideration paid to the bulgari family at the time of the acquisition was
The value of the purchase consideration paid by LVMH to the Bulgari family for the controlling 66% interest in Bulgari SPA is not provided in the given information.
Without the specific value of the purchase consideration, it is impossible to provide a numerical answer.
However, it is noteworthy that LVMH's acquisition of Bulgari SPA allowed the French company to expand its presence in the high-end jewelry market and further diversify its product offerings.
This acquisition also allowed LVMH to tap into Bulgari's strong brand recognition and loyal customer base.
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if the reserve ratio is equal to 10% then what is the value of the money multiplier? enter a number rounded to two decimal places.
The value of the money multiplier when the reserve ratio is 10% is 10.00.
To calculate the money multiplier when the reserve ratio is equal to 10%
Money Multiplier = 1 / Reserve Ratio
First, convert the 10% reserve ratio to a decimal by dividing by 100:
Reserve Ratio = 10% / 100 = 0.1
Next, plug the reserve ratio into the formula:
Money Multiplier = 1 / 0.1 = 10
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QUESTION 35 For any project, you can change the patter of cash flows over its economic life so that more is received in the early years and less in the later years relative to an Initial evaluation, the NPV: A. will go down relative to the initial estimate B. will go up relative to the initial estimate C. will not change the timing of when cash flows we received does not change D. It depends
The effect of changing the pattern of cash flows over a project's economic life on the project's NPV will depend on the size of the cash flows and the prevailing cost of capital.
The effect of changing the pattern of cash flows over a project's economic life on the project's NPV will depend on the size of the cash flows and the prevailing cost of capital.
If the cash flows are large and the cost of capital is low, it is possible that changing the pattern of cash flows to make more cash flows occur in the early years and less in the later years may result in a higher NPV than the initial evaluation. This is because the present value of early cash flows is higher than the present value of later cash flows when the cost of capital is low.
On the other hand, if the cash flows are small and the cost of capital is high, changing the pattern of cash flows to make more cash flows occur in the early years and less in the later years may result in a lower NPV than the initial evaluation.
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Complete question is :-
QUESTION 35 For any project, you can change the patter of cash flows over its economic life so that more is received in the early years and less in the later years relative to an Initial evaluation, the NPV:
A. will go down relative to the initial estimate
B. will go up relative to the initial estimate
C. will not change the timing of when cash flows we received does not change
D. It depends on the size of the cash flows and the prevailing cost of capital.
general piping has 9 warehouse locations across the country that they are considering consolidating to 3. the current inventory value is 3,767,137 dollars. what is your estimate of the future value of inventory after consolidation?
If General Piping decides to consolidate their nine warehouse locations into three, there will likely be some changes in the inventory value. The current inventory value of 3,767,137 dollars will need to be redistributed among the three new locations.
It is difficult to estimate the exact future value of inventory after consolidation as there are many factors that can affect the value, such as demand, supply, and market conditions. However, it is reasonable to assume that there may be some cost savings associated with consolidation, such as reduced transportation costs, lower overhead expenses, and increased efficiency.
To estimate the future value of inventory after consolidation, General Piping should conduct a thorough analysis of their inventory levels, sales data, and customer demand. They should also consider the potential impact of any changes in the market, such as shifts in consumer preferences or changes in the competitive landscape.
Overall, consolidating warehouse locations can be a smart move for companies looking to reduce costs and improve efficiency. However, it is important to carefully consider the potential impact on inventory levels and make informed decisions based on thorough analysis and data.
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The IIA defines data analytics as "The process whereby data is identified, consolidated and quality checked and put into a format where analysis can be done with the goal ofA.Initiating opportunities for discussions with senior management and the board."B.Obtaining relevant results for the benefit of the organization."C.Providing operational, financial, and other data to the organization."D.Identifying useful information that better supports corporate decision making."
The IIA defines data analytics as the process of identifying, consolidating, and quality checking data to prepare it for analysis with the goal of identifying useful information that better supports corporate decision making.
This involves obtaining relevant results for the benefit of the organization, providing operational, financial, and other data to the organization, and initiating opportunities for discussions with senior management and the board. Ultimately, data analytics is a critical tool for organizations to make informed decisions and achieve their goals.
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BOND AND STOCK VALUATION
EXCEL AND FINANCIAL CALCULATOR ONLYw. Consider a firm in a growing industry that is planning on increasing its annual dividend by 22% a year for the next 6 years. After that, they will decrease the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $2.20 per share. What is the current value of the share of this stock in the case the required return is 6.6%
The current value of the share of this stock using excel or financial calculator is $63.43.
To solve this problem, we need to use the dividend discount model, which calculates the present value of future dividends of the given stock. We can use either Excel or a financial calculator to do this calculation.
Using Excel:1. In a new Excel sheet, create a table with the following columns: Year, Dividend, Dividend Growth Rate, Present Value Factor, and Present Value.
2. In the Year column, enter the numbers 0 to 6 (representing the current year and the next 6 years).
3. In the Dividend column, enter the following formula for each year: =IF(A2=0,2.2, B1*(1.22)), where B1 is the dividend or the previous year and the growth rate is 22% for the first 6 years and 6% thereafter.
4. In the Dividend Growth Rate column, enter the following formula for each year: =IF(A2<6, 0.22, 0.06).
5. In the Present Value Factor column, enter the following formula for each year: =1/(1+0.066)^A2.
6. In the Present Value column, enter the following formula for each year: =C2*D2.
7. Add up the Present Value column for years 1-6 to get the present value of the growing dividend stream. This is the numerator of the dividend discount model.
8. To get the denominator of the model, divide the next year's dividend by the required return (0.066 in this case) and add a growth rate of 6% (as the company will be growing at that rate beyond year 6). The formula is: =2.2*(1+0.06)/(0.066-0.06).
9. Add the numerator and denominator of the dividend discount model to get the current value of the stock.
The current value of the share of this stock using Excel is $63.43.
Using a financial calculator:1. Enter the following values into the calculator: N = 6, I/Y = 6.6%, PMT = 2.2*1.22, FV = 0. This calculates the present value of the growing dividend stream for the first 6 years.
2. Enter the following values into the calculator: N = 1, I/Y = 6.6%-6%, PMT = 2.2*1.06, FV = 0. This calculates the present value of the dividend for year 7 and beyond.
3. Add the two values calculated in steps 1 and 2 to get the current value of the stock.
The current value of the share of this stock using a financial calculator is also $63.43.
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stocks A and B have the following returns: (Click on the following icon in order to copy its contents into a spreadsheet.) AWN 1 2 3 4 5 Stock A 0.11 0.04 0.13 -0.04 0.08 Stock B 0.05 0.03 0.05 0.01 -0.01 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.42, what is the expected return and standard deviation of a portfolio of 51% stock A and 49% stock B?
Expected returns refer to the anticipated profits or gains that an investor can expect to receive from an investment, taking into account the probability of different possible outcomes.
a. To find the expected return of each stock, we need to calculate the average of their returns:
Stock A: (0.11 + 0.04 + 0.13 - 0.04 + 0.08)/5 = 0.064 or 6.4%
Stock B: (0.05 + 0.03 + 0.05 + 0.01 - 0.01)/5 = 0.026 or 2.6%
Therefore, the expected return of Stock A is 6.4% and the expected return of Stock B is 2.6%.
b. To find the standard deviation of each stock, we can use the following formula:
s = sqrt[ Σ(xi - x)^2 / (n - 1) ]
where s is the standard deviation, xi is each return value, x is the mean of the returns, and n is the total number of returns.
For Stock A:
s = sqrt[ ((0.11 - 0.064)^2 + (0.04 - 0.064)^2 + (0.13 - 0.064)^2 + (-0.04 - 0.064)^2 + (0.08 - 0.064)^2) / (5 - 1) ]
s = sqrt[ 0.003616 ] = 0.06 or 6%
For Stock B:
s = sqrt[ ((0.05 - 0.026)^2 + (0.03 - 0.026)^2 + (0.05 - 0.026)^2 + (0.01 - 0.026)^2 + (-0.01 - 0.026)^2) / (5 - 1) ]
s = sqrt[ 0.000634 ] = 0.025 or 2.5%
Therefore, the standard deviation of Stock A is 6% and the standard deviation of Stock B is 2.5%.
c. To find the expected return and standard deviation of a portfolio consisting of 51% Stock A and 49% Stock B, we can use the following formulas:
Expected return of the portfolio = wA * RA + wB * RB
where wA and wB are the weights of Stock A and Stock B in the portfolio, and RA and RB are the expected returns of Stock A and Stock B.
Standard deviation of the portfolio = sqrt[ wA^2 * sA^2 + wB^2 * sB^2 + 2wAwB*ρ(A,B)sAsB ]
where sA and sB are the standard deviations of Stock A and Stock B, and ρ(A,B) is the correlation coefficient between Stock A and Stock B.
Plugging in the values, we get:
Expected return of the portfolio = 0.51 * 0.064 + 0.49 * 0.026 = 0.046 or 4.6%
Standard deviation of the portfolio = sqrt[ (0.51^2 * 0.06^2) + (0.49^2 * 0.025^2) + (2 * 0.51 * 0.49 * 0.42 * 0.06 * 0.025) ] = 0.037 or 3.7%
Therefore, the expected return of the portfolio is 4.6% and the standard deviation of the portfolio is 3.7%.
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The difference between the yields of long-term bonds and the yields of short-term bonds issued by the same corporation at the same time is usually caused by the difference in maturities (maturity risk premium). (True/False) If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.9%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? (Multiple Choice) a. 1.46% b. 1.51% c. 1.60% d. 1.30% e. 0%
True. The default risk premium on the corporate bond is 1.51%. The maturity risk premium is the difference between the yields of long-term bonds and the yields of short-term bonds issued by the same corporation.
This premium is primarily driven by the difference in maturities. In this case, the 10-year T-bonds have a yield of 6.2% while the 10-year corporate bonds yield 7.9%.
Thus, the maturity risk premium on all 10-year bonds is 1.3%. Additionally, corporate bonds have a liquidity premium of 0.4% versus a zero liquidity premium for T-bonds. When combined, this results in a default risk premium of 1.51% on the corporate bond.
In conclusion, the difference between the yields of long-term bonds and the yields of short-term bonds issued by the same corporation at the same time is usually caused by the difference in maturities. In this particular case, this premium is 1.3%. Additionally, corporate bonds have a liquidity premium of 0.4%, resulting in a default risk premium of 1.51%.
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Companies raised capital through several different sources: A. Explain the Advantage and Disadvantage of Debt (5 marks) B. Explain the Advantage and Disadvantage of Common Share (5 marks) C. Explain the Advantage and Disadvantage of Preferred Shares (5 marks)
Debt allows companies to raise capital without giving up ownership or control, but it increases financial risk and requires regular interest payments.
Common shares give investors ownership and potential for dividends and capital gains, but dilutes control and can be affected by market fluctuations.
A. Debt:
Advantages:
Interest on debt is tax-deductible, which lowers the overall cost of borrowing.
Disadvantages:
The interest and principal payments must be made regardless of the company's financial performance, which can create a cash flow burden.
If the company defaults on its debt obligations, it can lead to bankruptcy or other legal issues.
B. Common Shares:
Advantages:
Common shares do not have a fixed maturity date, so the company does not have to repay the investment unless it decides to buy back the shares.
Disadvantages:
The company's profits are shared among a larger number of shareholders, reducing the earnings per share for existing shareholders.
C. Preferred Shares:
Advantages:
Preferred shares provide a fixed dividend rate, which can be attractive to investors seeking a stable income stream
Disadvantages:
Preferred shares can be less liquid than common shares, as they may not be traded as frequently on public stock exchanges.
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ted riley owns a 2005 lexus worth $25,000. he owns a home worth $225,000. he has a checking account with $500 in it and a savings account with $1500 in it. he has a mutual fund worth $85,000. his personal assets are worth $90,000. he still owes $10,000 on his car, $100,000 on his home and has a balance on his credit card of $1,000. what is ted's net worth?
Ted Riley's net worth is $316,000
To calculate Ted Riley's net worth:We need to consider his assets (2005 Lexus, home, checking account, savings account, mutual fund, and personal assets) and his liabilities (car loan, home loan, and credit card balance).
1. Add up all of Ted's assets:
- 2005 Lexus: $25,000
- Home: $225,000
- Checking account: $500
- Savings account: $1,500
- Mutual fund: $85,000
- Personal assets: $90,000
Total assets = $25,000 + $225,000 + $500 + $1,500 + $85,000 + $90,000 = $427,000
2. Add up all of Ted's liabilities:
- Car loan: $10,000
- Home loan: $100,000
- Credit card balance: $1,000
Total liabilities = $10,000 + $100,000 + $1,000 = $111,000
3. Subtract Ted's liabilities from his assets to find his net worth:
Net worth = Total assets - Total liabilities = $427,000 - $111,000 = $316,000
Ted Riley's net worth is $316,000.
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The current price of a stock is $ 52.35 and the annual effective risk-free rate is 2.7 percent. A call option with an exercise price of $55 and one year until expiration has a current value of $ 1.88 . What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Show your answer to the nearest .01. Do not use $ or , in your answer. Because of the limitations of random numbers, some of the options may be trading below their intrinsic value or even less than 0. Hint, to find the present value of the bond, you do not need to make the e x adjustment, simple discount at the risk free rate.
The value of the put option written on the stock with the same exercise price and expiration date as the call option is $103.09 to the nearest .01.
To find the value of the put option, we can use the put-call parity formula: Put option value + Stock price = Call option value + Present value of exercise price. Since the exercise price for both the call and put options is $55 and the current stock price is $52.35, the present value of the exercise price is simply $55 discounted at the risk-free rate of 2.7% for one year: Present value of exercise price = $55 / (1 + 0.027)^1 = $53.62.
Using the values given in the problem, we can plug in the call option value and solve for the put option value:$53.62 + $52.35 = $1.88 + Put option value. Put option value = $103.09Therefore, the value of the put option written on the stock with the same exercise price and expiration date as the call option is $103.09 to the nearest .01.
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_____________________________ are the three alternative ways an international division's operating units can be organized.
A. Export departments, sales departments, or marketing departments
B. Local product groups, regional product groups, or world product groups
C. Geographical organizations, regional organizations, or global organizations
D. Local offices, foreign offices, or global offices
E. Geographical organizations, world product groups, or international subsidiaries
C. Geographical corporations, regional organizations, or international businesses are the 3 alternative methods an worldwide department's running units can be organized.
Geographical businesses involve dividing the international division via geographic areas, including Asia, Europe, and the Americas. every region operates independently and is answerable for adapting the corporation's products and advertising techniques to fulfill the precise wishes of the vicinity.
Regional organizations group countries within a place that proportion comparable traits, such as language, lifestyle, or economic conditions. This technique lets in for more performance in operations and advertising.
International organizations integrate operations across all international locations and regions, with a centralized control shape. This approach allows for extra coordination and consistency in operations and advertising, but may not be as flexible in responding to local marketplace conditions.
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Regional organizations, or international businesses
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C. Geographical corporations, regional organizations, or international businesses are the 3 alternative methods an worldwide department's running units can be organized.
Geographical businesses involve dividing the international division via geographic areas, including Asia, Europe, and the Americas. every region operates independently and is answerable for adapting the corporation's products and advertising techniques to fulfill the precise wishes of the vicinity. Regional organizations group countries within a place that proportion comparable traits, such as language, lifestyle, or economic conditions. This technique lets in for more performance in operations and advertising.
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You are going to rent a venue for a fashion
show. The venue will you have in mind is an old
theatre that lends itself well to the event with
excellent sight lines for the audience. However, the
décor and lighting plan by your artistic director for
your fashion show may compromise safety.
Here is the issue:
Drapes over the ceiling area will obscure the normal
lighting and will prevent the fire sensors and
sprinklers from working correctly. Also, there are a
number of props that may hinder access into and out
of the venue. On the other hand, the audience
expected is quite small. Answer the following
questions:
a) What are some of the safety risks associated with
this event?
b) In your opinion, who is responsible for the safety
of the venue and the audience?
c) How could the risk be reduced?
) What should the evacuation plan include?
a) Some safety risks associated with this event may include:
The potential for fire hazards due to obstructed fire sensors and sprinklers caused by the décor and drapes.
Restricted access to exits and entrances due to the presence of props or other set pieces, which could impede evacuation in case of an emergency.
b) The responsibility for the safety of the venue and the audience falls on both the event organizer and the venue management. As the organizer, you are responsible for ensuring that the event complies with safety regulations and guidelines.
The venue management is responsible for ensuring that the venue is up to code and safe for use.
c) The risk can be reduced by taking the following measures:
Reviewing and following safety regulations and guidelines.
Ensuring that the venue is up to code and safe for use.
Removing any props or set pieces that obstruct access to exits and entrances.
Installing additional safety measures, such as additional fire detectors, sprinklers, or safety barriers.
d) The evacuation plan should include the following:
Clearly marked exit signs and routes.
Regular safety drills and rehearsals.
Assigning designated safety personnel to monitor the event and assist with evacuation.
Communication systems, such as loudspeakers or walkie-talkies, to relay important safety messages to attendees.
Identifying and designating safe zones for attendees to gather in case of emergency.
A designated meeting spot outside the venue for attendees to gather after evacuation.
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antonia owns and runs a bakery in her neighborhood. she is the only person responsible for the liabilities of her bakery. her bakery is an example of a(n) .
Antonia owns and runs a bakery in her neighborhood. She is the only person responsible for the liabilities of her bakery. Antonia's bakery is an example of a sole proprietorship.
In a sole proprietorship, the business is owned and operated by one person who is solely responsible for all aspects of the business, including the liabilities. This type of business structure is the simplest and most common for small businesses.
As the only person responsible for the liabilities of her bakery, Antonia faces a higher level of personal risk. If her bakery incurs debts or faces legal issues, Antonia would be personally liable for these obligations. This means her personal assets could be at risk in the event of bankruptcy or a lawsuit against her bakery.
However, a sole proprietorship also has its advantages. It is relatively easy to set up and requires minimal paperwork and legal formalities. Antonia has complete control over her business, allowing her to make decisions quickly and adapt to changes in the market. Additionally, all profits generated by the bakery go directly to Antonia, which can be beneficial for her financially.
In summary, Antonia's bakery is a sole proprietorship, a business structure that offers simplicity and flexibility but also exposes the owner to personal liabilities.
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merchandise that is delivered, received, and sent immediately to a production area is referred to as a:
Merchandise that is delivered, received, and sent immediately to a production area is referred to as "just-in-time" inventory.
Just-in-time (JIT) inventory is a lean manufacturing strategy that focuses on reducing waste and increasing efficiency in the production process.
The goal of JIT inventory is to have materials delivered only when they are needed for production. This means that inventory levels are kept at a minimum, reducing storage costs and the risk of product obsolescence. When materials arrive, they are immediately sent to the production area, where they are used in the manufacturing process.
JIT inventory relies heavily on communication and coordination between suppliers and manufacturers to ensure that materials arrive on time and in the correct quantities. This requires a high level of trust and collaboration between all parties involved.
There are several benefits to using JIT inventory. It can lead to reduced inventory costs, improved quality control, and increased productivity. By having materials delivered only when they are needed, companies can also respond more quickly to changes in customer demand.
However, there are also risks associated with JIT inventory. If suppliers fail to deliver materials on time, it can cause delays in production and ultimately result in lost sales. Additionally, there is a higher level of risk associated with relying on a small number of suppliers for critical materials.
Overall, just-in-time inventory can be an effective strategy for companies looking to improve efficiency and reduce waste in their production processes.
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ou borrow $36,500 from a bank at 14% interest compounded monthly and can afford $500 monthly payments. How many months will it take for you to pay back the loan in full (rounded)? a. 164.5. months b. 189.3 months c. 127.5 months
d. 88.9 months
e. 97.2 months
It will take approximately 189 months (rounded) to pay back the loan in full with monthly payments of $500 at a 14% interest rate compounded monthly. The correct option is b.
To answer this question, we need to use the formula for the monthly payment of a loan, which is P = (r(PV))/(1-(1+r)^(-n)), where P is the monthly payment, r is the monthly interest rate (14%/12), PV is the present value of the loan ($36,500), and n is the number of months.
Plugging in the given values, we get P = ($500), r = (14%/12), PV = ($36,500), and solving for n, we get n = 189.3 months.
It is important to note that this calculation assumes that the monthly payments are made on time and in full each month. Any missed or late payments could affect the total length of the loan repayment period.
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A recommended way to allay employee anxieties about job analysis is?a.to promise that no job reductions will occur in the next 12 months.b.to conduct wage and salary surveys at the same time, because usually this will result in an upward adjustment of employee pay.c.include employees in the revision of job descriptions.d.to use a consulting firm to conduct the job analysis, thus removing the process from internal organizational politics.
The best way to allay employee anxieties about job analysis is to include employees in the revision of job descriptions. This will demonstrate to employees that they are valued and their input matters.
Employers should also explain why job analysis is important and the expected outcomes of the process. Employers should also reassure employees that job reductions are not the goal of job analysis.
If possible, employers should conduct wage and salary surveys at the same time as the job analysis, as this can result in an upward adjustment of employee pay.
Finally, employers may want to consider using a consulting firm to conduct the job analysis, thus removing the process from internal organizational politics. This can help to create a more neutral and objective environment for the job analysis.
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