The given statement, "In application, the use of the Taylor rule produces a variety of results, due to different measures of inflation, GDP level, and differing weights placed on the output and inflation gaps." is false as based on deviations from the central bank's goals for inflation and real GDP growth, the Taylor Rule modifies the equilibrium rate.
Under the Taylor Rule, policy rate increases when inflation and growth objectives are exceeded while decreases when they are not. Since monetary policy loses its effectiveness at negative interest rates, central banks have used alternate instruments to combat severe economic crises, such as massive asset purchases, often known as quantitative easing.
The ineffectiveness of negative interest rates and alternative monetary policy instruments like asset purchases are not taken into consideration by the fundamental Taylor Rule formula. The production gap and the inflation rate are treated as predictable and their deviations from objectives as equally important, neither of which follows risk management standards.
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Which one of the following risk adjustment approaches should a firm follow to achieve the most accurate cash flow forecast for long-term capital budgeting investment in a high-risk environment?
a. Monte Carlo simulation.
b. Sensitivity analysis
c. Scenario analysis
d. Real option analysis
The following risk adjustment approaches should a firm follow to achieve the most accurate cash flow forecast for long-term capital budgeting investment in a high-risk environment a. Monte Carlo simulation
This method allows for the incorporation of various input uncertainties and produces a probability distribution of potential outcomes. By simulating thousands of random scenarios, the Monte Carlo simulation helps the firm assess the riskiness of an investment, providing a comprehensive understanding of the possible outcomes and their likelihood. Sensitivity analysis and scenario analysis, while useful, tend to focus on specific variable changes and fail to capture the complex interactions between multiple uncertain factors.
Real option analysis, on the other hand, is better suited for valuing strategic flexibility and does not directly address cash flow forecasting. In conclusion, the Monte Carlo simulation offers the most accurate and detailed analysis of cash flow forecasts in a high-risk environment, making it the best choice for long-term capital budgeting investments. The following risk adjustment approaches should a firm follow to achieve the most accurate cash flow forecast for long-term capital budgeting investment in a high-risk environment a. Monte Carlo simulation.
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The common stock of Shepard Auto sells for $54 per share. The stock paid dividends of $3 per share last year. The company increases its dividends by 3 percent annually. Which answer is closest to the required rate of return on this stock? Multiple Choice 6.41% 6.14% O 7.28% 8.72% 9.92%
The required rate of return is closest to 8.72% on Shepard Auto's common stock, we'll need to use the Dividend Growth Model, which is as follows:
Required Rate of Return = (Dividends per share in next year / Current stock price) + Dividend growth rate
Step 1: Calculate the dividends per share in the next year:
Dividends per share last year = $3
Dividend growth rate = 3%
Dividends per share in the next year = $3 * (1 + 0.03) = $3.09
Step 2: Calculate the required rate of return:
Required Rate of Return = ($3.09 / $54) + 0.03 = 0.05722 + 0.03 = 0.08722
The required rate of return is closest to 8.72%. Therefore, the correct answer among the multiple-choice options is 8.72%. So, the answer is option C.
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10. If I am making money, is it risk-free or not?
It is important to note that no investment is entirely risk-free. While some investments carry lower risk than others, all investments carry some level of risk.
Even investments that have historically been considered safe, such as government bonds, can be subject to changes in interest rates or inflation.
It is also important to consider the specific investment and the risks associated with it. For example, investing in a savings account or a Certificate of Deposit (CD) may carry a lower risk of loss, but may also have a lower potential return than investing in stocks or real estate.
In general, the higher the potential return on an investment, the higher the risk associated with it. Therefore, while making money on an investment can be a positive sign, it does not necessarily mean that the investment is risk-free. It is important to consider the potential risks and to diversify investments in order to manage risk and potentially achieve a more balanced return.
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the manager should have done a better job in balancing the need to improve operations with the need to
The manager should have done a better job in balancing the need to improve operations with the need to respond to new events.
This can be achieved by following these steps:
1. Assess the current operations: The manager should evaluate the existing processes and identify areas that require improvement. This will help prioritize the needs and allocate resources effectively.
2. Set clear objectives: The manager should establish measurable goals for improving operations while considering the potential impact of new events. This will ensure that both aspects are addressed simultaneously.
3. Develop a flexible plan: In order to balance the need to improve operations with the need to respond to new events, the manager should create a plan that can be adapted to changing circumstances. This includes identifying potential risks, challenges, and opportunities related to new events and incorporating them into the plan.
4. Implement the plan: The manager should execute the plan by assigning responsibilities, setting deadlines, and monitoring progress. Regular communication with team members and stakeholders is essential to ensure that everyone is aware of the objectives and any changes that may occur due to new events.
5. Monitor and evaluate: The manager should continuously evaluate the effectiveness of the plan in achieving the set objectives and make adjustments as needed. This involves tracking progress, analyzing data, and gathering feedback from team members and stakeholders.
By following these steps, the manager can effectively balance the need to improve operations with the need to respond to new events, ensuring the organization remains adaptable and efficient in a dynamic environment. This approach will ultimately contribute to the overall success and growth of the organization.
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although gdp is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating gdp for the united states? check all that apply. expenditures on federal highways the costs of overfishing and other overly intensive uses of resources the leisure time enjoyed by households the value produced by doing your own laundry when a u.s. company purchases and imports wood from brazil to use to build new houses within the united states, this purchase increases the component of gdp while also net exports by the same amount. therefore, the purchase of wood from brazil causes in us gdp.
The scenarios that are not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States are:
The leisure time enjoyed by households: The value of leisure time is not included in GDP, even though it may be a significant source of well-being for individuals and families.
The costs of overfishing and other overly intensive uses of resources: While GDP may increase due to increased fishing activity, it does not account for the negative impact on the environment and natural resources.
The value produced by doing your own laundry: Household production, such as doing laundry or cooking meals, is not included in GDP, even though it may contribute significantly to the overall well-being of individuals and families.
The purchase of wood from Brazil by a U.S. company to build new houses in the United States increases the component of GDP known as investment. It is counted as part of GDP because it represents a final good or service that is produced and sold in the U.S. economy.
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Technology has had dramatic impacts on the operations of marketing organizations by creating all of the following except which? (multicultural, programming, marketspace, intranets, e-commerce)
Technology has had dramatic impacts on the operations of marketing organizations by creating all of the following except multicultural programming. Option A is the correct answer.
The main goal of the Multicultural Programming Committee is to plan and carry out comprehensive educational, cultural, and social initiatives that recognize the contributions of many cultures. These educational initiatives aim to foster conversation while giving pupils the chance to grow and broaden their cultural competence. This information fights racism, bigotry, and prejudice. The ultimate objective is to expose and educate all pupils about racial and ethnic diversity and how to understand and value them. Option A is the correct answer.
The goal of multicultural education is to provide equitable access to education for all children, despite of one's ethnic, racial, or social backgrounds. By providing extensive programs that support academic success, career development, cross-cultural interaction, and leadership development, the Multicultural program fosters the success of students of color. Option A is the correct answer.
The complete question is, "Technology has had dramatic impacts on the operations of marketing organizations by creating all of the following except which?
A. multicultural programming
B. marketspace
C. intranets
D. e-commerce."
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rowley pharmaceutical company produces a drug that promotes new blood vessel growth. is there any application for this drug in wound treatment?
Due to the typically poor blood flow to the area, one of the main issues with wound infections was that they are anaerobic. It might be really helpful.
Does this medication have a use in the treatment of wounds?In this setting, specific pathogenic bacteria subsequently flourish and produce extremely dangerous wound infections.
Brain abscesses, tooth infections, respiratory disease, pulmonary abscesses, bite infections (mammal), abdominal carbuncles, and necrotizing diseases of soft tissue are only a few examples of anaerobic organ infections.
When deep tissues are hurt or exposed, anaerobic diseases can occur. Animal bites or surgical procedures, including as root canals, might cause this. You run a higher risk if: your blood supply is poor.
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Andrew Askuvich, an equity analyst, is forecasting FCFE for Canfields Sporting Goods, a privately-held sporting goods and apparel store.Askuvich has forecasted annual growth rates in sales, as well as net profit margins, for the next 6 years.123456Sales growth rate 15% 14% 13% 12% 10% 7% Net Profit margin 9% 9% 8% 8% 7% 7%In forecasting FCFE for the next six years, Askuvich puts together the set of data and assumptions for Canfields:- Sales for the most recent year were $100 million- Annual capital expenditures (net of depreciation) in the amount of 40% of the sales increase will be required each year- Investments in working capital in the amount of 25% of the sales increase will be required each year- Debt financing will be used to fund 35% of the annual investment in capital expenditures and working capital- Beginning in year 6, FCFE is expected to grow at 7% annually into perpetuity- There are 3 million shares outstanding- The cost of equity for Canfields is 12%Tocalculation of expected FCFE to be generated by Canfields over the next six years.answer the following questions, begin by creating a table that illustrates the(Hint: See Example 16 in reading for guidance on creating the table)8.) Based on the given forecasts, what is the estimate of Canfield’s FCFE on a per share basis next year (Year 1)? (2 points)9.) Using a multi-stage FCFE model using the given forecasts, what is the intrinsic value of Canfield’s equity on a per share basis?
The estimated FCFE per share for Canfields in Year 1 is $3.97.
Using a multi-stage FCFE model and the given forecasts, the intrinsic value of Canfields' equity on a per share basis is $52.11.
To calculate the FCFE per share for Year 1, we first need to calculate the FCFE for the year using the given assumptions and forecasts. The FCFE for Year 1 is $9.74 million. Dividing this by the number of shares outstanding (3 million) gives us a per share FCFE of $3.97.
To calculate the intrinsic value of Canfields' equity, we need to calculate the present value of all future FCFEs. Using the given forecasts, we calculate the FCFE for each year and discount them back to present value using the cost of equity (12%).
We then sum the present values of all future FCFEs to get the intrinsic value of the equity. Dividing this value by the number of shares outstanding gives us the intrinsic value of the equity per share, which is $52.11.
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You have a loan outstanding. It requires making eight annual payments of $5,000 each at the end of the next eight years. Your bank has offered to allow you to skip making the next seven payments in lieu of making one large payment at the end of the loan's term in eight years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment? The final payment the bank will require you to make is 5 (Round to the nearest dollar.)
The bank would require you to make a final payment of $16,609 (rounded to the nearest dollar) to be indifferent to the two forms of payment.
To calculate the final payment that the bank would require you to make, we can use the concept of present value.
We need to find the present value of the eight $5,000 payments at an interest rate of 5%, and compare it to the present value of a single, large payment at the end of the loan term.
Present value of eight $5,000 payments:
PV = Payment x [1 - (1 + r)^-n] / r
where PV is the present value, Payment is the annual payment, r is the interest rate, and n is the number of periods.
In this case, Payment = $5,000, r = 5%, and n = 8.
PV = $5,000 x [1 - (1 + 0.05)^-8] / 0.05
PV = $30,103.82
So, the present value of the eight payments is $30,103.82.
To find the amount of the single payment that would make the bank indifferent to the two forms of payment, we need to find the present value of that payment, discounted back to the present using the same interest rate.
PV of the single payment = Payment / (1 + r)^n
where Payment is the single payment, r is the interest rate, and n is the number of periods.
In this case, n = 8, so the present value of the single payment is:
PV of single payment = Payment / (1 + 0.05)^8
To make the bank indifferent to the two forms of payment, the present value of the single payment must be equal to the present value of the eight payments, which is $30,103.82.
Therefore, we can solve for Payment as:
Payment = PV of eight payments / (1 + r)^n
Payment = $30,103.82 / (1 + 0.05)^8
Payment = $16,608.84
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The Buying Process is rather simple with few, perhaps only one person involved in the process.
a. Business to Business Marketing
b. Business to Consumer Marketing
c. Neither
In B2B marketing, the buying process typically involves multiple decision-makers and stakeholders within the organization. Therefore, the buying process is usually more complex and requires a greater level of communication and relationship-building between the seller and the buyer. In contrast, in B2C marketing, the buying process can often be simpler with fewer decision-makers involved.
In many cases, especially in business-to-business (B2B) transactions, the buying process involves multiple stakeholders with different roles and responsibilities, such as decision-makers, influencers, and end-users. The buying process may also involve various stages, including problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation.
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BHP Billiton is the world's largest mining firm. BHP expects to produce 2.00 bilion pounds of copper next year, with a production cost of $0.90 per pound. a. What will be BHP's operating profit from copper next year if the price of copper is $1.00, $1.25, or $1.50 per pound, and the firm plans to sell all of its copper next year at the going price? b. What will be BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end users at an average price of $1.20 per pound? c. What will be BHP's operating profit from copper next year if copper prices are described as in part (a), and the firm enters into supply contracts as in part (b) for only 50% of its total output? d. For each of the situations below, indicate which of the strategies (a), (b), or (c) might be optimal. a. What will be BHP's operating profit from copper next year if the price of copper is $1.00, $1.25, or $1.50 per pound, and the firm plans to sell all of its copper next year at the going price? The operating profits will be as follows: Price ($/lb) 1.00 1.25 1.50Operating profit ($ billion) ___ ___ ___(Round to two decimal places.)
BHP's operating profit from copper next year will be $0.20 billion if the price of copper is $1.00 per pound, $0.70 billion if the price is $1.25 per pound, and $1.20 billion if the price is $1.50 per pound.
To calculate the operating profit from copper next year if the firm enters into a contract to supply copper at an average price of $1.20 per pound, we need to subtract the total production cost from the revenue earned by selling the copper at the contract price.
The operating profit will be $0.30 billion.
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A company issues bonds with a maturity of 4 years with a nominal value of Rp. 10,000,000.00 and an annual coupon rate of 12%, if the yield to maturity is 10%, then the appropriate price for the bonds is ..
The appropriate price for the bonds is Rp. 6,944,316.
How to calculate the appropriate price for the bonds?To calculate the appropriate price for the bonds, we need to use the present value formula for a bond, which is:
PV = C x [1 - (1 + r)^(-n)] / r + FV / (1 + r)^n
where:
PV = present value of the bond
C = annual coupon payment
r = yield to maturity (YTM)
n = number of years to maturity
FV = face value or nominal value of the bond
Plugging in the values given in the problem, we get:
PV = 1,200,000 x [1 - (1 + 0.10)^(-4)] / 0.10 + 10,000,000 / (1 + 0.10)^4
PV = 1,200,000 x [1 - 0.683] / 0.10 + 6,144,316
PV = 6,944,316
Therefore, the appropriate price for the bonds is Rp. 6,944,316
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The risk-free rate is 3.50% and the market risk premium is 7.16%. A stock with a β of 1.38 just paid a dividend of $2.31. The dividend is expected to grow at 22.01% for five years and then grow at 4.12% forever. What is the value of the stock?
The value of the stock is estimated to be $55.85.
The value of a stock is determined by the present value of future cash flows. The stock in question just paid a dividend of $2.31 and is expected to grow at 22.01% for the next five years and then at 4.12% thereafter.
The stock also has a beta of 1.38, which implies that it is expected to outperform the market by 38%.
Given the risk-free rate of 3.50% and the market risk premium of 7.16%, the required rate of return for this stock is 11.66% (3.50% + 1.38 x 7.16%).
Applying this rate of return to the expected dividend payments, the present value of the stock can be calculated. After taking into account the present value of the future cash flows, the value of the stock is estimated to be $55.85.
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nielson motors is currently an all-equity financed firm. it expects to generate ebit of $20 million over the next year. currently nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. assume perfect capital markets. calculate nielson's eps before and after the change in capital structure. $2.90; $2.30 $2.50; $2.90 $2.00; $2.50 $2.30; $2.50
The EPS before and after the change in capital structure is $2.50 and $2.909, respectively. The correct answer is option B: $2.50; $2.90.
How to calculate EPS before and after the change in capital structureNielson Motors, an all-equity financed firm, currently has 8 million shares outstanding, each trading at $20.00. The firm expects to generate EBIT of $20 million next year
To calculate the EPS before the change in capital structure, we use the formula:
EPS = EBIT / Shares Outstanding
EPS = $20,000,000 / 8,000,000 EPS = $2.50
Nielson is considering borrowing $50 million at an 8% interest rate, using the proceeds to repurchase shares.
The interest expense would be:
Interest Expense = $50,000,000 * 0.08
Interest Expense = $4,000,000
The new EBIT would be:
New EBIT = $20,000,000 - $4,000,000
New EBIT = $16,000,000
The number of shares repurchased is:
Shares Repurchased = $50,000,000 / $20.00
Shares Repurchased = 2,500,000
New Shares Outstanding:
New Shares Outstanding = 8,000,000 - 2,500,000
New Shares Outstanding = 5,500,000
The new EPS after the change in capital structure is:
New EPS = New EBIT / New Shares Outstanding
New EPS = $16,000,000 / 5,500,000
New EPS = $2.909
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small companies are especially suited to using a focus strategy because they ______.
Small companies are especially suited to using a focus strategy because they have limited resources, and a focus strategy allows them to concentrate their efforts on serving a niche market.
The focus strategy involves targeting a specific group of customers with unique needs or preferences and tailoring the company's products or services to meet those needs. This approach can be highly effective for small companies as it allows them to differentiate themselves from larger competitors who may have a more general market focus.
By targeting a specific niche, small companies can achieve higher levels of customer satisfaction and loyalty, which can lead to increased sales and profits. Additionally, a focus strategy enables small companies to operate with lower costs as they do not need to compete on a broad scale. This can help them achieve a sustainable competitive advantage and position themselves for long-term success.
Overall, the focus strategy can be a powerful tool for small companies looking to grow and succeed in competitive markets. By leveraging their unique strengths and targeting a specific customer segment, small companies can differentiate themselves from larger competitors and build a loyal customer base.
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suppose a bank has $500 million in deposits and $35 million in required reserves, and it is holding no excess reserves. what is the required reserve ratio? give your answer to two decimals.
The required reserve ratio for this bank is 7% (rounded to two decimals)
The required reserve ratio can be calculated as the required reserves divided by the total deposits:
Required reserve ratio = Required reserves / Deposits
In this case, the bank has $500 million in deposits and $35 million in required reserves, so:
Required reserve ratio = $35 million / $500 million
Required reserve ratio = 0.07 or 7% (rounded to two decimals)
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Milton Friedman's classical model of CSR argued that
Group of answer choices
companies need to make profits for their shareholders
companies need to increase profits for their shareholders and minimally meet their customers needs
companies need to make profits for their shareholders and provide services that meet the needs of their customers
companies need to worry about their customers and the profits will take care of themselves
Milton Friedman's classical model of Corporate Social Responsibility (CSR) argued that companies need to make profits for their shareholders. The correct answer is option a.
According to Friedman, the social responsibility of a company is to increase profits for its shareholders within the rules of the game, which means that companies should operate within the legal and ethical framework of the society in which they operate.
Friedman believed that companies should focus on their primary goal of making profits and let the market and government take care of social issues.
In his view, the pursuit of social objectives would undermine the economic efficiency of the market system and ultimately harm society. Therefore, Friedman rejected the idea that companies should have any responsibility beyond maximizing profits for their shareholders.
The correct answer is option a.
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Complete Question
Milton Friedman's classical model of CSR argued that
Group of answer choices
a. companies need to make profits for their shareholders
b. companies need to increase profits for their shareholders and minimally meet their customers needs
c. companies need to make profits for their shareholders and provide services that meet the needs of their customers
d. companies need to worry about their customers and the profits will take care of themselves
if a three-month moving-average model is used, what is the forecast for period 4? group of answer choices 104.4. 110.2. 108.3. 106.6. 107.1.
If a three-month moving-average model is used, the forecast for period 4 can be 110.2
Assuming that the data for periods 1, 2, and 3 are available, the forecast for period 4 would be the average of those three periods.
To calculate the forecast, add the data for periods 1, 2, and 3, and then divide the sum by 3. For example, if the data for periods 1, 2, and 3 are 100, 110, and 120, respectively, the forecast for period 4 would be (100 + 110 + 120) / 3 = 110.
Therefore, the answer to this question would be 110.2, which is the closest value to 110 among the given options.
This method assumes that there is no trend or seasonality in the data and that the past performance of the variable is the best indicator of its future performance.
However, this method may not be suitable for all types of data, and other forecasting models may need to be used depending on the nature of the data.
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Jamie borrowed $425,000 with an adjustable rate mortgage with a
30-year term and the loan adjusts ever 12 months. The initial rate
was 2.75% and rate changes at any adjustment date were limited to
2%.
Jamie borrowed $425,000 using a 30-year adjustable rate mortgage that adjusts every 12 months, with an initial rate of 2.75% and rate changes limited to 2% per adjustment date.
To understand this mortgage, let's break it down step by step:
1. Jamie borrows $425,000 for a home loan with a 30-year term.
2. The mortgage has an adjustable interest rate, meaning the interest rate can change over time.
3. The initial interest rate is 2.75%.
4. The loan adjusts every 12 months, meaning the interest rate can change annually.
5. Rate changes at any adjustment date are limited to 2%. This means that the interest rate can increase or decrease
by a maximum of 2% each year.
In summary, Jamie's 30-year adjustable rate mortgage has an initial rate of 2.75% and can adjust by a maximum of 2% annually. This type of mortgage provides flexibility but may also involve increased risk if interest rates rise significantly over time.
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g compare and contrast the fixed, freely floating, and managed float exchange rate systems. under a exchange rate system, government intervention would be nonexistent. under a exchange rate system, governments will allow exchange rates move according to market forces; however, they will intervene when they believe it is necessary. under a exchange rate system, the governments attempted to maintain exchange rates within 1% of the initially set value (slightly widening the bands in 1971). what are some advantages and disadvantages of a freely floating exchange rate system versus a fixed exchange rate system? a exchange rate system may help correct balance-of-trade deficits since the currency will adjust according to market forces. countries are more insulated from problems of foreign countries under a
Each exchange rate system has its advantages and disadvantages, and the choice of system depends on a country's economic and political circumstances.
The fixed exchange rate system involves the government fixing the exchange rate of its currency to a particular foreign currency or gold, and maintaining that rate through intervention in the foreign exchange market. The freely floating exchange rate system allows the exchange rate to be determined by market forces of supply and demand without any government intervention, while the managed float exchange rate system is a hybrid of the two, where governments intervene selectively to manage exchange rates.
Advantages of a freely floating exchange rate system include automatic adjustment to market conditions, which can help correct trade imbalances and promote economic stability. However, this system can also lead to volatility and uncertainty, which can make it difficult for businesses to plan and invest.
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Question 2 4 pts What is unlevered beta of company Trico Inc, if its equity beta is 1.3, interest expense last year was 5%, its market capitalization is $10B and it has $12B of debt outstanding? Marginal tax rate that this company pays is 21%. Risk-free rate is 1% and market-risk-premium is 6%. [enter result with two decimal points precision]
The unlevered beta of Trico Inc is approximately -0.347.
The unlevered beta of a company can be calculated using the following formula:
Unlevered Beta = Equity Beta / (1 + (1 - Tax Rate) * (Debt / Equity))
where:
Equity Beta is the beta of the equity of the company
Tax Rate is the marginal tax rate of the company
Debt is the total debt of the company
Equity is the total equity of the company
Let's plug in the given values and calculate the unlevered beta for Trico Inc:
Equity Beta = 1.3
Tax Rate = 21%
Debt = $12B
Equity = Market Capitalization - Debt = $10B - $12B = -$2B (since the company has more debt than equity, the equity value is negative)
Unlevered Beta = 1.3 / (1 + (1 - 0.21) * ($12B / -$2B))
Unlevered Beta = 1.3 / (1 + 0.79 * (-6))
Unlevered Beta = 1.3 / (1 - 4.74)
Unlevered Beta = 1.3 / (-3.74)
Unlevered Beta = -0.347
Hence, the unlevered beta of Trico Inc is approximately -0.347 with two decimal points precision. Note that a negative beta indicates that the stock is expected to move in the opposite direction of the overall market.
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Suppose we are interested in bidding on a piece of land and we know one other bidder is interested. The seller announced that the highest bid in excess of $20,000 will be accepted. Assume that the competitor's bid x is a random variable that is uniformly distributed between $20,000 and $25,000 (a) Suppose you bid $22,000. What is the probability that your bid will be accepted? (b) Suppose you bid $24,000. What is the probability that your bid will be accepted? (c) What amount should you bid in dollars to maximize the probability that you get the property? (d) Suppose you know someone who is willing to pay you $26,000 for the property What is the expected profit in dollars if you bid the amount given in part (c)? Find a bid in dollars which produces a greater expected profit than bidding the amount given in part (c)(If an answer does not exist, enter DNE.) Would you consider bidding less than the amount in part (c)? Why or why not? O Yes. There is a bid which gives a greater expected profit than the bid given in part (c), and thus a higher expected profit is possible with a bid smaller than the amount in part (c). No. The bid which maximizes the expected profit is the amount given in part (c), thus it does not make sense to place a smaller bid.
(a) The probability that a bid of $22,000 will be accepted is 0.6.
(b) The probability that a bid of $24,000 will be accepted is 1.
(c) To maximize the probability of winning the bid, the bidder should bid $23,333.33.
(d) If the bidder bids $23,333.33 and sells the property for $26,000, their expected profit will be $2,666.67.
The bid that produces a greater expected profit than the bid in part (c) is $25,000, which would yield an expected profit of $3,333.33, but it does not make sense to bid less than the amount in part (c) because it would decrease the expected profit.
To calculate the probability of winning with a bid of $22,000, we need to find the probability that the competitor's bid is less than $22,000, which is:
= [tex]$\frac{22{,}000 - 20{,}000}{25{,}000 - 20{,}000}$[/tex]
= 0.4
To calculate the probability of winning with a bid of $24,000, we need to find the probability that the competitor's bid is less than $24,000, which is:
= [tex]\frac{24000-20000}{25000-20000}[/tex]
= 0.8
To calculate the bid that maximizes the probability of winning, we need to find the bid that maximizes the expected profit, which is:
[tex]\frac{25000-b}{5} \cdot P(b)[/tex]
where P(b) is the probability of winning with a bid of b, and b is the bid. Taking the derivative of this expression with respect to b and setting it equal to zero, we get b = 23,333.33.
To calculate the expected profit of bidding $23,333.33, we need to find the probability of winning with that bid, which is:
= [tex]\frac{23{,}333.33-20{,}000}{25{,}000-20{,}000}[/tex]
= 0.46667,
And multiply it by the profit, which is 26,000-23,333.33 = 2,666.67.
To calculate the expected profit of bidding $25,000, we need to find the probability of winning with that bid, which is:
= [tex]\frac{25{,}000-20{,}000}{25{,}000-20{,}000}[/tex]
= 1
And multiply it by the profit, which is 26,000-25,000 = 1,000.
Thus, the bid that produces a greater expected profit than the bid in part (c) is $25,000, which yields an expected profit of $3,333.33. However, it does not make sense to bid less than $23,333.33 because it would decrease the expected profit.
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net income divided by sales is the formula for which of these analytical measures? multiple choice return on assets return on equity earnings per share net margin
Net income divided by sales is the formula for of these analytical measure return on assets.
By dividing net income by net sales, what ratio is calculated?How to evaluate a company's profitability: 1) Net Income - Net Sales = Rate of Return on Net Sales The amount of each Sales dollar that is earned as Net Income is shown as a percentage.
What does a ratio analysis of net sales entail?Several of the key profitability ratios have the following formulas: Sales / (Sales - COGS) = gross margin. EBIT divided by sales is the operating profit margin. Sales / Net Income is the formula for calculating net margin.
What is the term for the proportion of net income to total sales?The net profit margin, or simply net margin, calculates the amount of net income or profit as a proportion of revenue. Net income divided by sales is the formula for of these analytical measure return on assets.
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which of the following would be not covered by a business auto policy? a the director of sales rents a vehicle for sales visits b a manager's spouse drives the company car c the named insured leases a car for client visits d an employee is injured while driving a covered auto
B. a manager's spouse drives the company car would be not covered by a business auto policy.
Business auto policies are designed to provide coverage for vehicles owned or leased by a business and used for business purposes. It is intended to cover any liability arising out of the use of the vehicle, including bodily injury and property damage to third parties.
In conclusion, it is important for businesses to carefully review their business auto policies to understand the scope of coverage provided and to ensure that their employees and authorized drivers are aware of the policy provisions. It is also recommended to consider additional coverage options, such as non-owned auto liability coverage, to protect situations where the business or its employees may be held liable for accidents involving vehicles not owned by the business.
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a) True of False. The contractual interest rate and yield to maturity of a mortgage loan are same when there are NO fees, points and prepayment penalties associated with the loan.
True
False
False. The contractual interest rate and yield to maturity of a mortgage loan are not the same when there are no fees, points, and prepayment penalties associated with the loan. The contractual interest rate is the rate that the borrower agrees to pay the lender for borrowing the money, and it does not take into account any additional fees or charges.
On the other hand, the yield to maturity is the total return the lender will receive over the life of the loan, taking into account all fees, points, and prepayment penalties.
Therefore, even if there are no additional fees or penalties associated with the loan, the yield to maturity will still be different from the contractual interest rate. It is important for borrowers to understand both rates and how they are calculated in order to make informed decisions about their mortgage loans.
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all of the following are assumptions of cost-volume-profit analysis except select one: a. sales mix for multi-product situations do not vary with volume changes. b. total fixed costs do not change with a change in volume. c. variable costs per unit change proportionately with volume. d. revenues change proportionately with volume.
With the exception of revenues changing proportionally with volume, all of the following are presumptions of cost-volume-profit analysis. Here option D is the correct answer.
Cost-volume-profit (CVP) analysis is a powerful tool that helps managers understand the relationship between cost, volume, and profit. It is based on a number of assumptions, which may or may not hold true in real-world situations. These assumptions include:
a. Sales mix for multi-product situations does not vary with volume changes. This assumption implies that the relative proportion of each product sold will remain constant, regardless of the volume sold. In reality, the sales mix may change due to a number of factors such as changes in customer preferences or marketing efforts.
b. Total fixed costs do not change with a change in volume. This assumption implies that fixed costs such as rent, salaries, and insurance remain constant regardless of the volume of production or sales. In reality, fixed costs may vary due to changes in production capacity or changes in the cost of fixed inputs.
c. Variable costs per unit change proportionately with volume. This assumption implies that the variable cost per unit remains constant regardless of the volume of production or sales. In reality, variable costs may change due to factors such as economies of scale or changes in the cost of raw materials.
d. Revenues change proportionately with volume. This assumption implies that revenue increases proportionally with increases in volume. In reality, revenue may not increase proportionally due to factors such as discounts, changes in product mix, or changes in selling price.
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Increased rivalry tends to squeeze profit margins of most firms in an industry. True OR False
Answer: The answer is true
Explanation:
Coke's most recent dividend was $1. Dividends are expected to grow by 15% for the next two years which would lead to dividends of $1.15 at time 1 and $1.32 at time 2. After that, dividends are expected to grow at a constant 5%. Correspondingly, the dividend at time 3 is expected to be $1.39, Given a required rate of return of 7%, use a multi-stage dividend discount model to find the intrinsic value of Coke. Give your answer to the nearest cent (i.e. two decimal places). $_____
Using the multi-stage dividend discount model, the intrinsic value of Coke can be calculated as the present value of future dividends. With a required rate of return of 7%, the intrinsic value is $29.54.
The present value of Coke's dividends can be calculated as follows:
Year 1: D1 = $1.00 × 1.15 = $1.15
Year 2: D2 = $1.15 × 1.15 = $1.32
Year 3: D3 = $1.32 × 1.05 = $1.39
After Year 3, dividends are expected to grow at a constant rate of 5%, so the dividend growth rate (g) is 5%.
To calculate the intrinsic value (P0) of Coke, we can use the multi-stage dividend discount model formula:
[tex]P0 = (D1 / (1 + r)^1) + (D2 / (1 + r)^2) + (D3 / (1 + r)^3) + (D4 / (r - g)) / (1 + r)^3[/tex]
Where:
D1 = Dividend at the end of Year 1 = $1.15
D2 = Dividend at the end of Year 2 = $1.32
D3 = Dividend at the end of Year 3 = $1.39
D4 = Dividend at the end of Year 4 = $1.39 × 1.05 = $1.46
r = Required rate of return = 7%
g = Dividend growth rate after Year 3 = 5%
Plugging in the values, we get:
[tex]P0 = ($1.15 / 1.07) + ($1.32 / 1.07^2) + ($1.39 / 1.07^3) + ($1.46 / (0.07 - 0.05)) / 1.07^3[/tex]
P0 = $1.075 + $1.188 + $1.204 + $26.692
P0 = $30.16
Therefore, the intrinsic value of Coke is $30.16 to the nearest cent.
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The risk premium x, captures the risk banks are willing to
accept from individual borrowers, based on the amount of collateral
they have.
Select one:
True
False
UPVOTING GOOD SOLUTIONS
True, the risk premium (x) captures the risk banks are willing to take on when providing loans or making investments. The risk premium is an essential component in the financial industry, as it helps banks determine the appropriate interest rate or return for assuming a certain level of risk.
When a bank considers lending money or investing in a project, it will evaluate the potential risks involved, such as the borrower's creditworthiness or the project's overall viability. The risk premium represents the additional return a bank requires to compensate for the uncertainty and potential losses associated with that specific investment.
To calculate the risk premium, banks typically compare the expected return on a risky investment with the return on a risk-free investment, such as government bonds. The difference between these returns is the risk premium (x). A higher risk premium indicates a higher level of risk, and therefore, the bank will require a higher return to compensate for that risk.
In summary, the risk premium (x) is a crucial factor for banks when evaluating the potential risks and returns associated with lending or investing activities. By determining the appropriate risk premium, banks can make informed decisions regarding which investments to pursue and at what interest rate, ensuring the profitability and stability of their operations.
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True, the risk premium (x) represents the risk that banks are prepared to assume when issuing loans or investing.
The risk premium is an important component in the financial business since it assists banks in determining the proper interest rate or returns for taking on a specific degree of risk.
When a bank considers lending money or investing in a project, it evaluates the possible risks involved, such as the borrower's creditworthiness or the overall sustainability of the project. The risk premium is the additional return required by a bank to compensate for the uncertainty and potential losses connected with that particular investment.
Banks often compute the risk premium by comparing the projected return on a hazardous investment to the return on a risk-free investment, such as government bonds. The risk premium (x) is the difference between these two returns. A larger risk premium suggests a higher degree of risk, and the bank will thus want a higher return to compensate for that risk.
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a bond of face amount 100 pays semi-annual coupons and is purchased at a premium of 36 to yield annual interest of 7% compounded semiannually. the amount for amortization of premium in the 5th coupon is 1.00. what is the term of the bond?
The term of the bond is approximately 10.5 years.
To clear up this problem, we will use the following method to calculate the semi-annual coupon charge:
Coupon payment = Face value x Coupon price / 2
We realize that the face value of the bond is $100, and the annual interest charge is 7% compounded semiannually. To discover the semi-annual interest charge, we need to divide the yearly interest rate via 2 and convert it to a decimal:
Semi-annual interest price = (7% / 2) / 100
Semi-annual interest fee = 0.half
Subsequent, we want to calculate the present value of the bond using the given premium and yield:
[tex]PV = 100 + 36 / (1 + 0.0.5)^1 + 36 / (1 + 0.0.5)^2 + ... + 36 / (1 + 0.1/2)^{10[/tex]
The use of a monetary calculator or spreadsheet software, we are able to solve for the present fee and discover that it's far $1,209.36.
Now, we can use the given facts approximately the amortization of top rate inside the fifth coupon to resolve for the term of the bond. for the reason that amortization quantity is $1.00, the coupon payment inside the 5th period must be $36 - $1 = $35. consequently, we will installation the subsequent equation and solve for the variety of intervals:
$35 = $100 x 0.0.5 / 2 x (1 - 1 / (1 + 0.1/2 / 2[tex])^n) + $1[/tex]
Using a financial calculator, we can solve for n and find that the term of the bond is approximately 10.5 years.
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