Question 1

Suppose you purchased a 76.000 April lean hog put for 6.850. You expect basis will 2.50 over when you sell your hogs.

Calculate your minimum net selling price (Price floor).

For each of the April lean hog futures price determine your net selling price. The net/gain loss on the long put is intrinsic value – premium paid.

Question 2

Suppose you sold an April lean hog futures at 79.400 to hedge the sale of your hogs. You expect basis will 2.50 under when you sell your hogs. For each of the April lean hog futures prices determine your net selling price.

The market portfolio has an expected return of 11 percent and a standard deviation of 19 percent. The risk-free rate is 3.2 percent.

a. What is the expected return on a well-diversified portfolio with a standard deviation of 27 percent

b. What is the standard deviation of a well-diversified portfolio with an expected return of 15 percent?

A company releases outstanding earnings numbers and raises guidance for the next fiscal year, and the stock price as a result jumps up 20%, then it is optimal to convert a convertible bond on this company into stocks right away. Assume that the stock pays no dividend.

This problem is a complex financial problem that requires several skills, perhaps some from previous sections. Clark and Lana take a 30-year home mortgage of $124,000 at 7.2%, compounded monthly. They make their regular monthly payments for 5 years, then decide to pay $1000 per month. (a) Find their regular monthly payment. (Round your answer to the nearest cent.)

(b) Find the unpaid balance when they begin paying the $1000. (Round your answer to the nearest cent.)

(c) How many payments of $1000 will it take to pay off the loan? Give the answer correct to two decimal places.
monthly payments

(d) Use your answer to part (c) to find how much interest they save by paying the loan this way. (Round your answer to the nearest cent.)

This problem is a complex financial problem that requires several skills, perhaps some from previous sections. During four years of college, Nolan MacGregor's student loans are $4,000, $3,500, $4,400, and $5,000 for freshman year through senior year, respectively. Each loan amount gathers interest of 2%, compounded quarterly, while Nolan is in school and 3%, compounded quarterly, during a 6-month grace period after graduation. (a) What is the loan balance (in dollars) after the grace period? Assume the freshman year loan earns 2% interest for 3/4 year during the first year, then for 3 full years until graduation. Make similar assumptions for the loans for the other years. (Round your answer to the nearest cent.)

(b) After the grace period, the loan is amortized over the next 10 years at 3%, compounded quarterly. Find the quarterly payment (in dollars). (Round your answer to the nearest cent.)

(c) If Nolan decides to pay an additional $90 per payment, how many payments will amortize the debt? (Round your answer to two decimal places.)
payments

What amount (in dollars) should be added to the last payment to pay the loan in full? (Round your answer to the nearest cent.)
$  

(d) How much will Nolan save (in dollars) by paying the extra $90 with each payment? (Round your answer to the nearest cent.)
$

A uniform gradient cash flow contains a first payment of $500 at the end of the first year, $600 payment at the end of the second year, $700 payment at the end of the third year, $800 payment at the end of the fourth year, and so on. There are a total of 15 payments. The annual interest rate is 8%. Determine: (a) the present, (b) the future, and (c) the uniform annual amounts that are equivalent to the cash flow.

1) You estimate Bayleaf Inc. has free cash flows of $70 million arriving in 1 year, $74 million in 2 years, and $80 million in 3 years. After year 3, the long term growth rate of FCF will be 3% (thus year 4 FCF is $82.4 million). Bayleaf has $241 million in net debt and a weighted average cost of capital of 14%. What is your estimate of the Enterprise Value of Bayleaf (in millions)?

2)You believe Orange Inc. has an enterprise value of $833 million. Orange's balance sheet shows $77 million in cash and $165 million in debt. What is your estimate for the stock price if Orange has 5 million shares outstanding?

A construction crane collapsed while working on a new building for Metro City. A pedestrian was killed. The husband of the victim is suing Metro City and the construction company. The city attorney, in consultation the city’s liability insurer and the construction company, has offered two out-of-court settlements to the husband of the victim. Here are the settlement options

Option 1: Four annual payments of $225,000 with the first payment one year from today.

Option 2: Five Payments of $200,000 with the payments one year, three years, five years, seven years, and nine years from today.

Assuming a 6% discount rate, which settlement option is the best from the perspective of Metro City?

XYZ Electronics is a mid-sized electronics manufacturer located in Germany. The company president is Mark Johnson, who inherited the company. When it was founded, over 70 years ago, the company originally repaired radios and other household appliances. Over the years the company expanded into manufacturing, and is now a reputable manufacturer of various electronic items. Sam Smith, a recent MBA graduate, has been hired by the company’s finance department.

One of the major revenue-producing items manufactured by XYZ is a personal digital assistant (PDA). XYZ currently has one PDA model on the market, and sales have been excellent. The PDA is a unique item in that it comes in a variety of tropical colours and is pre-programmed to play Billy Bragg music. However, as with any electronic item, technology changes rapidly, and the current PDA has limited features in comparison with newer models. XYZ spent €750,000 to develop a prototype for a new PDA that has all the features of the existing PDA but adds new features such as cell-phone capability. The company has spent a further €200,000 for a marketing study to determine the expected sales figures for the new PDA.

XYZ can manufacture the new PDA for €155 each in variable costs. Fixed costs for the operation are estimated to be €4.7 million per year. The estimated sales volumes are 74,000, 95,000, 125,000, 105,000 and 80,000 per year for the next five years, respectively. The unit price of the new PDA will be €360. The necessary equipment can be purchased for €21.5 million, and will be depreciated using the 20 per cent reducing-balance method. It is believed the value of the equipment in five years will be €4.1 million.

As previously stated, XYZ currently manufactures a PDA. Production of the existing model is expected to be terminated in two years. If XYZ does not introduce the new PDA, sales will be 80,000 units and 60,000 units for the next two years, respectively. The price of the existing PDA is €290 per unit, with variable costs of €120 each and fixed costs of €1,800,000 per year. If XYZ does introduce the new PDA, sales of the existing PDA will fall by 15,000 units per year, and the price of the existing units will have to be lowered to €255 each. Net working capital for the PDAs will be 20 per cent of sales, and will occur with the timing of the cash flows for the year: for example, there is no initial outlay for NWC, but changes in NWC will first occur in year 1 with the first year’s sales. XYZ has a 35 per cent corporate tax rate and a 12 per cent required return.

Mark has asked Sam to prepare a report that answers the following questions.

Questions

a) What is the payback period of the project?

b) What is the profitability index of the project?

c) What is the IRR of the project?

d) What is the NPV of the project?

What is the price of a four-year zero-coupon (or pure discount) bond with a $100 face value and yield to maturity (YTM) of 5.95%?

The Japanese government issued a zero-coupon bond with maturity of 2054 and face value of ?50,000. The current price of this bond is ?42,690. Find its YTM in percentage

Suppose we have a seven-year bond with face value of $1000, a coupon rate of 7%, quarterly coupon payments, and a yield to maturity of 5% APR. Find its price.

Cash Budgeting
The sales budget for your company in the coming year is based on a quarterly growth rate of 10 percent, with the first-quarter sales projection at $165 million. In addition to this basic trend, the seasonal adjustments for the four quarters are, in millions, 0, -$12, –$6, and $18, respectively. Generally, 50 percent of the sales can be collected within the quarter and 45 percent in the following quarter; the rest of the sales are bad debt. The bad debts are written off in the second quarter after the sales are made. The beginning accounts receivable balance is $84 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter.

Don't round off until you get to the end.

Describe and provide examples of price and quality controls in health care policies.

Question

(a) If a company XYZ Limited has stated retained earnings of A$100m and has in total issued 150 million ordinary shares, has drawn down bank debt of A$200 million, carries goodwill of A$87m, has no net cash and the market share price of XYZ is currently $1.40. Calculate the enterprise value of XYZ.

(b) If an investor has a short term investment horizon of 2-3 weeks then the most appropriate investment strategy for generating alpha returns above benchmark could likely be which of the following? Choose only one appropriate option and explain your reasoning.
a. technical analysis

b. fundamental analysis

c. micro-economic industry analysis

d. geo-political risk analysis

Parramore Corp has $17 million of sales, $2 million of inventories, $2 million of receivables, and $2 million of payables. Its cost of goods sold is 70% of sales, and it finances working capital with bank loans at an 7% rate. Assume 365 days in year for your calculations. Do not round intermediate steps.

1. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places.
   days
2. 
   
3. If Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places.
   days
4. 
   
5. How much cash would be freed up, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $
6. 
   
7. By how much would pretax profits change, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.
   $