annual cash flow,

-500,000
125,000
150,000
175,000
200,000
250,000

What is the Modified IRR (MIRR), with a reinvestment rate equal to the WACC of 8%?

annual cash flow,

-500,000
125,000
150,000
175,000
200,000
250,000

What is the IRR of the investment

A borrower is offered a 30 year, fully amortizing ARM with an initial rate of 3.35%. After the first year, the interest rate will adjust each year, using 1 yr LIBOR as the index, plus a margin of 175bp. The price of the property is $8,000,000 and the loan will have an initial LTV ratio of 75% At the first reset date, 1 year LIBOR is at 3%. What is the borrower s payment during the 2nd year of the loan

A borrower is interested in comparing the monthly payments on two otherwise equivalent 30 year FRMs. Both loans are for $100,000 and have a 3.35% interest rate. Loan 1 is fully amortizing, where as Loan 2 has negative amortization with a $120,000 balloon payment due at the end of the life of the loan. How much higher is the monthly payment on loan 1 versus loan 2? (Hint: calculate both payments and take the difference. Only the future values of the loans are different. Round your answer to two decimal places.)

11: Sue owns 2000 shares of the 20 million outstanding common shares of ABC Corp. ABC stockholders have preemptive rights. Now, ABC decides to sell 2 million new common shares through a rights offering. How many rights will Sue receive?

        a. 200

        b. 0.20

        c. 0.10

        d. 20

18: Suppose we employ a "price-weighted" methodology to construct and track a two-stock index based on Stocks X and Y. Stock X has an initial price of $10 and there are 10 million shares outstanding. Stock Y has an initial price of $20 and there are 40 million shares outstanding. One month later, Stock Xs price is $12 and Stock Ys price is still $20. The shares outstanding remain the same. What is the percentage change in our price-weighted index over the one-month period?

        a. 0

        b. 20.00%

        c. 6.67%

        d. 2.22%

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<6> You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. Draw the CML (capital market line) and your fund’s CAL on an expected return/standard-deviation diagram.

1. What is the slope of the CML?
2. Please characterize in one short paragraph the advantage of your fund over the passive portfolio investing in S&P 500 index.

[NOTE: CML (capital market line) is a special case of the CAL; specifically, the risky portfolio in the CML line is a market portfolio.  (In practice, we often use S&P 500 index as a proxy for the market portfolio.) ]

The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Guthrie Enterprises needs someone to supply it with 159,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost $1,990,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that in five years this equipment can be salvaged for $169,000. Your fixed production costs will be $284,000 per year, and your variable production costs should be $11.30 per carton. You also need an initial investment in net working capital of $149,000. The tax rate is 24 percent and you require a return of 13 percent on your investment. Assume that the price per carton is $17.90.

a. Calculate the project NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. What is the minimum number of cartons per year that can be supplied and still break even? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

c. What is the highest fixed costs that could be incurred and still break even? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Question 2-7 are based on the following series of futures price (F(0), F(1),... F(6)):

Day 0: F(0)=$212

Day 1: F(1)=$211

Day 2: F(2)=$214

Day 3: F(3)=$209

Day 4: F(4)=$210

Day 5: F(5)=$202

Day 6: F(6)=$200

Suppose you are going to long 20 contracts. The initial margin=$10 per contract, and the maintenance margin is $2.

Questions:

How much do you need to deposit in the trading account at Day 0?

Using the same set of information from Question 2, what is the ending balance in Day 1?

Using the same set of information from Question 2, figure out what is the first day, on which, you receive margin call and need to put extra money into the trading account?

Using the same set of information from Question 2, answering what is the additional fund that needs to put into account on Day 6?

Using the same set of information from Question 2, answering what is the ending balance at Day 6?

Using the same set of information from Question 2, answering which day has the largest gain among the 6 days?

A firm is considering developing a Customer Relationship Management (CRM) system in order to better learn their customer’s preferences, and simplifying the ordering process. The firm is considering outsourcing the development to a well-known vendor. The vendor estimates the development cost to be $1 Million, which will be due upfront. The firm expects to generate additional revenues from better targeting of customers to the tune of $250,000 every year for the next ten years. The ongoing licensing and maintenance costs for the initiative is expected to be $25,000 annually. Assuming that the investment will be made in Year 0, and the annual benefits and costs will be incurred at the end of each year,

What is the Payback Period (rounded in years) for the project using discounted cash flows? What is the Return on Investment (again using discounted cash flows) for the project? What would be the Payback Period and the Return on Investment if the additional revenues were $200,000 annually instead of $250,000?

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Read Parts 1 and 2 of the article Morgan Stanley Round table on Capital Structure and Payout Policy and provide a summary of the salient points made by the panelists on the optimal capital structure and the payout policy of the firm

Find the following values. Compounding/discounting occurs annually. Round your answers to the nearest cent.

a. An initial $600 compounded for 10 years at 3%.$  

b. An initial $600 compounded for 10 years at 6%.$  

c. The present value of $600 due in 10 year at 3%.$  

d. The present value of $2,655 due in 10 years at 6%.$  

e. The present value of $2,655 due in 10 years at 3%.$  

Define present value.

1. The present value is the value today of a sum of money to be received in the future and in general is less than the future value.
2. The present value is the value today of a sum of money to be received in the future and in general is greater than the future value.
3. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value.
4. The present value is the value in the future of a sum of money to be received today and in general is less than the future value.
5. The present value is the value in the future of a sum of money to be received today and in general is greater than the future value.

-Select one

How are present values affected by interest rates?

Assuming positive interest rates, the present value will increase as the interest rate increases.

Assuming positive interest rates, the present value will decrease as the interest rates increases.

Assuming positive interest rates, the present value will decrease as the interest rates decrease.

Assuming positive interest rates, the present value will not change as the interest rate increases.

Assuming positive interest rates, the present value will not change as the interest rate decreases.

Executives at Microsoft are interested to get into the drone delivery business. Since it would take them too much time to set up their own operation, they decide to acquire “Flyit” corporation. “Flyit” has been operating a drone delivery service for 4 years now, and they are the most successful operators in the market. Microsoft executives offer “Flyit” two purchase options. The first option is one $40 million lump sum payment. The second option is paying five annual payments of $10 million over the next five years.

i) If the annual interest rate is 7%, find the present value of both options? [Note: you are supposed to show every step of your calculation and interpret the result]

ii)Evaluate the net present values of both option and identify which option is more cost effective for Microsoft?

Explain all the recipe you have to use in order to be able to maximize expected return given a predefined risk?

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.60%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.40%. Assume the rate of return on both funds’ portfolios (before any fees) is 5% per year.


a. How much will an investment of $100 in each fund grow to after 1 year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Loaded-up Fund:

Economy Fund:

b. How much will an investment of $100 in each fund grow to after 2 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Loaded-up Fund:

Economy Fund:

c. How much will an investment of $100 in each fund grow to after 11 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Loaded-up Fund:

Economy Fund: