Q6) A stock had the following annual returns: 5.10% , 20.17% , -24.68% , and 26.60%. Compute the following for the stock:
a) Expected Return :
b) Variance :
c) Standard Deviation :
In: Finance
Assume Hogan Surgical Instruments Company has $2,000,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 18 percent, but with a high-liquidity plan, the return will be 14 percent. If the firm goes with a short-term financing plan, the financing costs on the $2,000,000 will be 10 percent; with a long-term financing plan, the financing costs on the $2,000,000 will be 12 percent. (Review Table 6-11 for parts a, b, and c of this problem.)
In: Finance
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You are going to invest in the following portfolio: A and B A B Expected return 12% 9% Standard deviation of returns 6% 3% Beta 1.2 .8 If you invest 75% in security A and they have a +0.35 correlation of returns, find; a. The expected return from the portfolio; and b. The standard deviation of returns from the portfolio. |
In: Finance
Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $2 million as a result of an asset expansion presently being undertaken. Fixed assets total $3 million, and the firm plans to maintain a 45% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 10% of total sales, and the federal-plus-state tax rate is 40%.
What is the expected return on equity under each current assets level? Round your answers to two decimal places.
Restricted policy %
Moderate policy %
Relaxed policy %
In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption?
No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales.
Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales.
Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs.
Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm.
Yes, the current asset policies followed by the firm mainly influence the level of fixed assets.
How would the firm's risk be affected by the different policies? The input in the box below will not be graded, but may be reviewed and considered by your instructor.
In: Finance
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An asset costs $590,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 35 percent, and the appropriate interest rate is 9 percent. |
| a. |
What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Lease payment | $ |
| b. |
Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive NPV for both parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| Lease payment range | $ to $ |
In: Finance
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You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $4,500,000, and it would be depreciated straight-line to zero over three years. Because of radiation contamination, it will actually be completely valueless in three years. Assume that the tax rate is 35 percent. You can borrow at 14 percent before taxes. |
| What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Break-even lease payment | $ |
In: Finance
(Risk-adjusted NPV) The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of $ 12,000 and will operate for 9 years. Project A will produce expected cash flows of $5,000 per year for years 1 through 9, whereas project B will produce expected cash flows of $6,000 per year for years 1 through 9. Because project B is the riskier of the two projects, the management of Hokie Corporation has decided to apply a required rate of return of 19 percent to its evaluation but only a required rate of return 11 percent to project A. Determine each project's risk-adjusted net present value.
What is the risk-adjusted NPV of project A?
In: Finance
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Quartz Corporation is a relatively new firm. Quartz has experienced enough losses during its early years to provide it with at least eight years of tax loss carryforwards. Thus, Quartz’s effective tax rate is zero. Quartz plans to lease equipment from New Leasing Company. The term of the lease is six years. The purchase cost of the equipment is $900,000. New Leasing Company is in the 40 percent tax bracket. There are no transaction costs to the lease. Each firm can borrow at 8 percent. |
| a. | What is Quartz’s reservation price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Reservation price | $ |
| b. | What is New Leasing Company’s reservation price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Reservation price | $ |
In: Finance
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You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $7,120,000, and it would be depreciated straight-line to zero over five years. Because of radiation contamination, it will actually be completely valueless in five years. You can lease it for $1,900,000 per year for five years. Assume that the tax rate is 35 percent. You can borrow at 11 percent before taxes. |
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Calculate the NAL. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NAL | $ |
| Should you lease or buy? | ||||
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In: Finance
A company purchased an equipment that falls in 3-year property class. The cost of the equipment is 75,000 and installation cost is 5,000. The equipment is expected to have 3,000 salvage value. Using the MACRS depreciation table, calculate the MACRS depreciation charges for the 2nd year.
A.34,650
B.35,100
C.36,000
D.33,750
In: Finance
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You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,400,000, and it would be depreciated straight-line to zero over three years. Because of radiation contamination, it will actually be completely valueless in three years. You can lease it for $2,225,000 per year for three years. Assume the tax rate is 35 percent. The borrowing rate is 14 percent before taxes. |
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Your company does not expect to pay taxes for the next several years, but the leasing company will pay taxes. Over what range of lease payments will the lease be profitable for both parties? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| Lease payment range | $ to $ | ||
In: Finance
Discuss the reasons broker-dealers tend to hold less equity capital than commercial banks.
In: Finance
Corporation accountants assembled the following data for the year ended December 10,2018:
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ATTERA CORPORATION |
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December 31 |
2018 |
2017 |
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Current assets: |
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|
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Cash and cash equivalents |
$78,700 |
$28,000 |
|
Accounts receivable |
69,600 |
64,200 |
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Inventory |
79,500 |
84,400 |
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Current liabilities: |
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|
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Accounts payable |
$58,700 |
$55,700 |
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Income tax payable |
13,900 |
16,900 |
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Transaction Data for 2018: |
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Net income |
$58,000 |
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Purchase of treasury stock |
15,100 |
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Issuance of common stock for cash |
36,800 |
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Loss on sale of equipment |
9,000 |
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Payment of cash dividends |
18,500 |
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Depreciation expense |
21,000 |
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Issuance of long-term note payable in exchange for cash |
30,000 |
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Purchase of building for cash |
127,000 |
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Sale of equipment for cash |
57,000 |
Required: Prepare Corporation's statement of cash flows and explain why do you add back depreciation to cash flow statement?
In: Finance
I need to see this work done in excel please using formulas. Thank you!
4) You are saving for retirement in 20 years. Today, you place $100,000 in a bank account that pays 4% interest, compounded annually, leaving the funds on deposit for the entire 20 years. You also contribute $2,000 each year into your pension plan for 10 years, beginning this year. The pension plan grows at 7% a year. How much do you have available for retirement, 20 years from now? BE CAREFUL; this is a multi-step problem.
In: Finance
A corporate bond matures on October 31, 2035. Its coupon rate is 5.00% and face value is $100. Its yield is 5.90%. How much is its price on June 3, 2020?
In: Finance