1. The market and Stock J have the following probability distributions.  Calculate the standard deviations for the Stock J.

   Probability	r M	r J
   0.3	-10%	10%
   0.4	20%	18%
   0.3	25%	30%

   		6.22%
   		14.87%
   		12.50%
   		3.85%
   		7.81%

How do you balance short-term and long-term investments?

How does channel conflict figure into your pricing decisions? How do you minimize channel conflict?

The CEO of the company also talks to you on Monday morning as follows:- “How is the cost of equity and cost of debt related? Anyway, the cost of issuing debt is generally lower than the cost of issuing equity. However, I also worry that borrowing too much may lead to higher probability of bankruptcy. What major considerations we should make in the determination of the debt-equity ratio of our company? I have heard about the Modigliani and Miller (M&M) proposition. Would it give us any insight?” said the CEO. Regarding the talks of CEO with you on Monday morning, explain your points to your CEO. Illustrate your explanation with example. (limit your answer to 450 words)

A firm is considering an investment in a new machine with a price of $18 million to replace its existing machine. The current machine has book value of $6 million and a salvage value today of $4.5 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.7 million in operating costs each year over the next four years. Both machines are depreciated using straight-line method and will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $250,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 39 percent. What is the net present value (NPV) of the decision to replace the old machine?

What are the characteristic of good venture team for a new business in this modern world? (1000 words)

The CEO of HuaWa Company is considering a five-year investment project of setting up a production factory in Shezhen of China for manufacturing 5G (5^th Generation) mobile phones. You are a financial manager of the company. Under this current situation of China, explain to the CEO the major considerations and problems associated in the estimation of cashflow of this project. The CEO knows that there are (Internal Rate of Return) IRR and (Net Present Value) NPV methods to evaluate the project. When would it be better to use IRR rather than NPV method to examine the acceptability of the project in this case? The CEO also asks you if it is possible to have a positive initial cash flow at the beginning of the project. Respond also to this question of CEO and illustrate your explanation with example(s). (limit your answer to 450 words

First Citiwide Change Bank has made $10 million in loan commitments, and wants to have a plan to deal with this issue.   Why is this a source of risk? If you knew First Citiwide had a large amount of core deposits, would this suggest leaning towards stored liquidity or purchased liquidity to deal with this risk? Explain

company D is currently an unlevered firm. the company expects to generate $200 milllion of operating profits in perpetuity. the firm is considering a capital restructuring to have $500 million of debt. its cost of debt is 6%. unlevered firms in the same industry have cost of equity capital of 12%. the corporate tax rate is 30%. a. what is the value of company D before capital restructuring? b. what will be the value of company D after capital restructuring? c. what will be the WACC of company D after capital restructuring?

Why managing growth is much easier than starting up a new business? (1000 words)

Samuel company, a toy retailer, is publicly listed in Hong Kong. The company is thinking of investing in natural gas wells in Russia. This would be a five-year project. The CEO of the company has employed you as a financial manager for this investment project. Explain to the CEO the major considerations, methods and challenges in determining the required rate of return for this project. Explain if there would be any difference in the estimation of required rate of return for a private firm or a publicly traded firm. Explain also whether it is important to consider the issue of operating leverage in analysing this project. The CEO says “ The cost of capital depends on the source of the money, not the risk of the project.” Do you agree? Explain and illustrate your explanation with example. (limit your answer to 450 words)

Trade-off theory suggests that the capital structure decision is essentially a cost- benefit analysis. What benefit and cost do firms compare when making financing decisions?