Explain how materiality and audit procedures to gather evidence are important in planning an audit.

1. If the proper goal of a finance manager is to maximise shareholder wealth how does managing the agency problem contribute to this goal? Discuss whether you believe purely financial incentives are enough to manage the agency problem?     

You would like to speculate on a rise in the price of a certain stock. The current stock price is $40 and a three-month call with a strike price of $42 costs $2.50. You have $5,000 to invest. Identify two alternative strategies. Outline the advantages and disadvantages of each.

Suppose it is September and a speculator consider that a stock is likely to decrease in value over the next three months. The stock price is currently $100, and a three-month put option with a strike price of $99 is currently selling for $5.00 per share. • create a table which compares selling short 2000 shares of stock and buying a put option written on 2000 shares of stock. Use December stock prices of $85 and $115.

Create a statement of operation for Chester Springs Hospital

Note: Not all of the givens may be used.

Givens (in '000s) For the Year Ended September 30, 20x1

Bad debt expense                                                                                                     $10,200

Cash                                                                                                                          $14,300

Net patient revenues                                                                                              $198,700

Net accounts receivable                                                                                           $26,400

Wages payable                                                                                                         $10,500

Inventory                                                                                                                     $3,800

Long-term debt                                                                                                         $27,000

Supply expense                                                                                                         $25,000

Gross plant, property, and equipment                                                                   $130,000

Parking revenue                                                                                                         $1,200

Depreciation expense                                                                                               $11,300

General expense                                                                                                       $48,000

Taxes                                                                                                                        ($1,400)

Accounts payable                                                                                                        $4,800

Interest expense                                                                                                         $1,400

Labor expense                                                                                                          $93,000

Accumulated depreciation                                                                                       $40,000

Long-term investments                                                                                          $104,800

If the focus of senior executives in corporations is to maximise shareholder wealth, discuss the following two “unresolved issues” in finance today and how they may contribute to reducing shareholder wealth:
a) What risks should firms take?   
b) Pay-out policies – the trade-off between dividends and growth.

You are trying to allocate your assets into a risky portfolio and the purchase of a risk free asset with a return of 2%. You use the following data to estimate information about the risky portfolio:

If you have a risk-aversion factor of 2.5, what percentage of your total portfolio should be in the risky portfolio?

1. What is meant by an agency cost or agency problem as it relates to corporate finance? Name and discuss any two mechanisms Boards of Directors use to control or minimise agency costs or the agency problem?

Assuming the borrower is in no danger of default, under what conditions might a lender be willing to accept a lesser amount from a borrower than the outstanding balance of a loan and still consider the loan paid in full?

You are considering how to invest part of your retirement savings.You have decided to put

$ 600 comma 000$600,000

into three​ stocks:

51 %51%

of the money in GoldFinger​ (currently

$ 28$28​/share),

6 %6%

of the money in Moosehead​ (currently

$ 75$75​/share),

and the remainder in Venture Associates​ (currently

$ 4$4​/share).

Suppose GoldFinger stock goes up to

$ 36$36​/share,

Moosehead stock drops to

$ 67$67​/share,

and Venture Associates stock

risesrises

to

$ 16$16

per share.

a. What is the new value of the​ portfolio?

b. What return did the portfolio​ earn?

c. If you​ don't buy or sell any shares after the price​ change, what are your new portfolio​ weights?

a. What is the new value of the​ portfolio?

The new value of the portfolio is

​$nothing.

​ (Round to the nearest​ dollar.)

b. What return did the portfolio​ earn?

The portfolio earned a return of

nothing​%.

​(Round to two decimal​ places.)

c. If you​ don't buy or sell any shares after the price​ change, what are your new portfolio​ weights?

The weight of Goldfinger is now

nothing​%.

​(Round to two decimal​ places.)  The weight of Moosehead is now

nothing​%.

​(Round to two decimal​ places.) The weight of Venture is now

nothing​%.

​(Round to two decimal​ places.)

Despite your better judgment you bought a lottery ticket you won! You now need to decide which payout option to take: a) an immediate lump sum of $130,000; b) $1,000 per month to be received at the end of this month and every month thereafter for 40 years in total; or, c) $10,000 to be received one year from now and every year thereafter for 50 years in total.

Assuming an annual discount rate of 9%, which payout option should you take based on a comparison of the present value of each of the 3 payout options (i.e., please note the present value of each alternative and which one you would select)?

Find the present value of the streams of cash flows shown in the following​ table. Assume that the​ firm's opportunity cost is 14​%.

a. The present value of stream A is ​$

b. The present value of stream B is ​$

c. The present value of stream C is ​$

Which assertion about statement 1 and statement 2 is true?  

Project A would cost 19,998 dollars today and have the following other expected cash flows: 3,983 dollars in 1 year, 7,670 dollars in 3 years, and 13,620 dollars in 4 years. The cost of capital for project A is 6.11 percent. Project B would cost 16,941 dollars today and have the following other expected cash flows: 2,942 dollars in 1 year, 6,526 dollars in 3 years, and 13,004 dollars in 4 years. The cost of capital for project B is 8.6 percent.

Statement 1: Project A would be accepted based on the project’s net present value (NPV) and the NPV rule

Statement 2: Project B would be accepted based on the project’s internal rate of return (IRR) and the IRR rule

If you invest 3000 today and expect to profit $200 a year for 10 years what id the IRR on the investment?

What is the project's NPV?

Crane Lumber, Inc., is considering purchasing a new wood saw that costs $60,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,800 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax rate is 34 percent, and its opportunity cost of capital is 11.10 percent.