You are considering investing in Australian shares and decide to investigate the shares of two Australian companies: Woodside Petroleum Ltd (WPL.AX) and Commonwealth Bank of Australia (CBA.AX).

Below are the opening prices, closing prices and dividends paid for WPL Ltd and CBA for the financial year 2018-2019.

Construct the minimum variance portfolio (MVP) comprising of only WPL and CBA and calculate the risk (standard deviation) and return of this minimum variance portfolio. (Hint: To calculate return of MVP you need annual holding period returns of the shares.)

A company’s common stock is expected to pay $2 in dividends annually over the next four years. At the end of the fourth year, its stock is expected to be valued at $45. If the firms cost of equity is 12%, what is its intrinsic value? What should its stock sell for in 1 year?

Please use excel and show work.

Ingram Electric Products is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.

Suppose that Treasury bills offer a return of about 6% and the expected market risk premium is 8.5%. The standard deviation of Treasury-bill returns is zero and the standard deviation of market returns is 20%. Use the formula for portfolio risk to calculate the standard deviation of portfolios with different proportions in Treasury bills and the market. (Note: The covariance of two rates of return must be zero when the standard deviation of one return is zero.) Graph the expected returns and standard deviations.

https://www.chegg.com/homework-help/suppose-treasury-bills-offer-return-6-expected-market-risk-p-chapter-7-problem-22p-solution-9780077356385-exc?hwh_cr=1

Can someone explain from step 3 onwards, as the explanation is too brief.

For step 4, why do we have to add the numbers together (0.06+0.85) . Where is 0.145 coming from?

And isn't this 0.085?

Thanks!

A pension plan is obligated to make disbursements of $2.5 million, $3.5 million, and $2.5 million at the end of each of the next three years, respectively. Find the duration of the plan's obligations if the interest rate is 8% annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Rico needs approximately ​$2,800 to buy a new computer. A​ two-year unsecured loan through the credit union is available for 12.75 percent interest. The current rate on his revolving home equity line is 9.50 ​percent, although he is reluctant to use it. Rico is in the 15 percent federal tax bracket and the 5.75 percent state tax bracket. Which loan should he​ choose? Why? Regardless of the loan​ chosen, Rico wants to pay off the loan in 24 months. Calculate the monthly payments for​ him, assuming both loans use the simple interest calculation method.

a) The​ after-tax cost of the home equity loan is 7.53%. ​(Round to two decimal​ places.)

b) The payment on the credit union loan would be ​$132.77. ​(Round to the nearest​ cent.)

c) The payment on the home equity loan would be ​$______. ​(Round to the nearest​ cent.)

d)

Which security should sell at a greater price?

a.  A 10-year Treasury bond with a 5% coupon rate or a 10-year T-bond with a 6% coupon.

• A 10-year Treasury bond with a 5% coupon rate

• A 10-year T-bond with a 6% coupon

b. A three-month expiration call option with an exercise price of $40 or a three-month call on the same stock with an exercise price of $35.

• A three-month call on the same stock with an exercise price of $35

• A three-month expiration call option with an exercise price of $40

c. A put option on a stock selling at $50 or a put option on another stock selling at $60. (All other relevant features of the stocks and options are assumed to be identical.)

• A put option on a stock selling at $50

• A put option on another stock selling at $60

With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a “surf lifestyle for the home.” With limited capital, they decided to focus on surf print table and floor lamps to accent people’s homes. They projected unit sales of these lamps to be 8,300 in the first year, with growth of 4 percent each year for the next five years. Production of these lamps will require $48,000 in net working capital to start. The net working capital will be recovered at the end of the project. Total fixed costs are $108,000 per year, variable production costs are $16 per unit, and the units are priced at $44 each. The equipment needed to begin production will cost $188,000. The equipment will be depreciated using the straight-line method over a five-year life and is not expected to have a salvage value. The effective tax rate is 39 percent and the required rate of return is 25 percent.

What is the NPV of this project?

A project has an initial cost of $60,000, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 12%. Show your work.

What is the project’s payback period?

What is the project’s discounted payback period?

Linda Jones is deciding between two investment projects.

Choice 1

Linda can invest into a young biotech firm. She expects that she will need to pay this firm $35,000 at the end of each year for the next two years. After that, she expects to receive back from the firm $90,000 at the end of each year for 18 years.

Choice 2

Linda can invest $200,000 today into an AI firm. She expects to be paid $42,000 at the end of the year, and expects cash flows from the AI firm to increase by 5% every year, paid at the end of each year in perpetuity

1. “Draw” timelines (tables), showing cash flows of each investment.
2. Suppose Linda’s discount rate is 12%. Which project should she choose?
3. At which discount rate would Linda be indifferent between her two choices?

Fire Co. pays great dividends.  The most recent annual dividend payment was $2.10 at the end of December 2018.  For the next three years, Fire Co's dividends are expected to grow at 17 percent annually due to the company’s successful wood chopping mechanisms.  After the period of temporary growth, there is a 5 year transitional period in which dividends will decline by 2 percent each year until reaching a constant growth rate for the indefinite future.  If the discount rate for Fire Co.'s stock is 12 percent, what is the value of the stock today?

Walmart Financials:

For each of the categories/financial measures that show a difference between the two years, determine what factors could have caused the differences.

A project has annual cash flows of $3,000 for the next 10 years and then $5,000 each year for the following 10 years. The IRR of this 20-year project is 11.49%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent. $