You have a borrowing capacity of 5 million USD, and 500 million JPY. You observe that the bid/ask interest rate quote on USD is 1%/3%. The bid/ask interest rate quote on the JPY is 0.5%/2%. The spot exchange rate is 87.3 JPY/USD, and you expect that the USD is going to appreciate to 97.4 JPY/USD over the next 6 months (180 days). If you conduct a speculative trade on your expectations of exchange rate change, and your expectations are correct, what will be your total profit, as measured in USD?
In: Finance
Domino’s Pizza abandoned its current expansion into several European markets. The chain announced it would suspend its plan to add new stores and sell approximately 100 existing stores in Switzerland, Sweden, Iceland and Norway. The decision came after stores in these four countries failed to make a profit for several years.
Investors applauded the decision and pushed UK division of Domino’s Pizza’s stock price up by more than 5% after the announcement. The chain indicated it would focus future efforts on the UK and Ireland and rebuild relationships with franchisees. These relationships were damaged over time as Domino’s Pizza failed to respond to issues of rising food costs and higher wages.
The UK and Irish outlets were very profitable for years but have been hurt by competition from online delivery such as Uber Eats and Deliveroo. Domino’s is no longer “the only game in town” and the chain needs to help franchisees compete in the new market. The firm failed to invest enough in IT infrastructure to help them compete with these new sources. Franchise owners registered their displeasure by refusing to participate in proposed marketing campaigns until the issues are addressed.
In: Finance
You plan to purchase a $270,000 house using a 15-year mortgage
obtained from your bank. The mortgage rate offered to you is 5.00
percent. You will make a down payment of 20 percent of the purchase
price.
a. Calculate your monthly payments on this
mortgage.
b. Construct the amortization schedule for the
mortgage. How much total interest is paid on this mortgage?
Construct the amortization schedule for the mortgage? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))
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How much total interest is paid on this mortgage?
In: Finance
Q1) A(n) 6.1% bond with 10 years left to maturity has a YTM of 9.1%. The bond's price should be $__________. You should assume that the coupon payments occur semiannually.
Q2) A 10-year 4.8% coupon bond was issued 2 years ago. Similarly risky bonds are yielding 6%. Assume semi-annual coupon payments. The bond's price should be $___________.
If you can, please complete both! Thank you so much.
In: Finance
At year-end 2018, Wallace Landscaping’s total assets were $2.09 million, and its accounts payable were $390,000. Sales, which in 2018 were $2.4 million, are expected to increase by 25% in 2019. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 in 2018, and retained earnings were $205,000. Wallace has arranged to sell $135,000 of new common stock in 2019 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2019. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 6%, and 35% of earnings will be paid out as dividends. What was Wallace's total long-term debt in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What were Wallace's total liabilities in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar. $ How much new long-term debt financing will be needed in 2019? (Hint: AFN - New stock = New long-term debt.) Do not round intermediate calculations. Round your answer to the nearest dollar. $
In: Finance
If I deposit $5,000 a year for 10 years, age 25 to 35, at 10% interest, and then let the sum/accumulation sit for 30 years, also earning 10% per year that might be an astute investment. But my older brother who graduated from the “school down south,” says that I should wait until I am 35 and making a ton of money and then I can deposit $7,500 a year for 30 years at 10% and I will be much better off…….since you are a University of Utah grad, and unlike some other universities (Tempe Normal) you can walk and chew gum at the same time, which of the following is correct? Group of answer choices
Both would yield virtually the same sum, within $1,000 of each other without rounding off.
The $5,000 a year would give about $979,258 more because of the power of compound interest.
The $7,500 scenario would provide me with at least $156,786 more.
The $7,500 scenario would provide me with about $156,786 less.
In: Finance
In: Finance
Montgomery Corp is currently worth $30 million as a company, but has $50 million of debt. There is a potential project that costs $60 million that would require shareholders to provide an additional $30 million to invest in. In one year, the project will yield $99 million or $55 million with 50% probability each. If the investment is not made, the firm will file for bankruptcy today. Suppose a 10% discount rate.
The shareholders will _____ the investment because they stand to _____. The investment is _____ for the firm and _____ for the debtholders.
(Ignore taxes and bankruptcy costs)
Group of answer choices
approve; gain $10 million; bad; bad
approve; gain $5.45 million; good; bad
disapprove; lose $10 million; bad; good
disapprove; lose $5.45 million; good; good
In: Finance
Think of an organization of your choice, which involves in trading mobile phones. Explain the various approaches used in segmenting markets and also describe how the marketing mix is used to position your products in a market
In: Finance
You are a senior manager at Nittany Aircraft and have been authorized to spend up to $550,000 for projects. The three projects you are considering have the following characteristics:
Project A: Initial investment of $420,000. Cash flow of $195,000 at year 1 and $235,000 at year 2. This is a plant expansion project, where the required rate of return is 13 %.
Project B: Initial investment of $210,000. Cash flow of $180,000 at year 1 and $140,000 at year 2. This is a new product development project, where the required rate of return is 16 %.
Project C: Initial investment of $165,000. Cash flow of $145,000 at year 1 and $90,000 at year 2. This is a market expansion project, where the required rate of return is 16 %.
Assume the corporate discount rate is 17 %.
What is the IRR of project A? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations)
What is the NPV of project A? (Round answer to 2 decimal places. Do not round intermediate calculations)
What is the PI of project A? (Round answer to 2 decimal places. Do not round intermediate calculations)
What is the IRR of project B? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations)
What is the NPV of project B? (Round answer to 2 decimal places. Do not round intermediate calculations)
What is the PI of project B? (Round answer to 2 decimal places. Do not round intermediate calculations)
What is the IRR of project C? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations)
What is the NPV of project C? (Round answer to 2 decimal places. Do not round intermediate calculations)
What is the PI of project C? (Round answer to 2 decimal places. Do not round intermediate calculations)
What is the incremental IRR (aka, crossover point) between Project B & Project C? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations)
In: Finance
A 25-year maturity bond has a 8% coupon rate, paid annually. It sells today for $887.42. A 15-year maturity bond has a 7.5% coupon rate, also paid annually. It sells today for $899.5. A bond market analyst forecasts that in five years, 20-year maturity bonds will sell at yields to maturity of 9% and that 10-year maturity bonds will sell at yields of 8.5%. Because the yield curve is upward-sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7%.
a. Calculate the expected rate of return of the 25-year bond over the five-year period. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected rate of return% ?
b. What is the expected return of the 15-year bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected rate of return% ?
In: Finance
Chuck Brown will receive from his investment cash flows of $3,155, $3,500, and $3,820 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at the end of three years? (Round to the nearest dollar.)
In: Finance
What is the purpose of calculating WACC, meaning how can it be used to calculate the current value of the firm and to assess if the firm creating value?
In: Finance
Knott's Industries manufactures standard and super premium backyard swing sets. Currently it has four identical swing-set-making machines, which are operated 250250 days per year and 8 hours each day. A capacity cushion of 1515 percent is desired. The following information is also known:
Standard Model Super Premium Model
Annual Demand: 20,000 10,000
Standard Processing Time: 5 min 17 min
Average Lot Size: 60 25
Standard Setup Time per Lot: 30 min 45 min
a. Does Knott's have sufficient capacity to meet annual demand?
b. How many machines are needed?
In: Finance
Bond has following charaateristics: par value €1000, 5,5%coupon rate, paid annually and 15 years to maturity. YTM is 6.5%
A) Find Macaulay duration of that bond (Dmac)
B) Find modified duration of that bond (Dmod)
In: Finance