choose the correct answer :

1. All of the following Influence capital budgeting cash flows EXCEPT:

_     accelerated depreciation

_    salvage value

_     tax rate changes

_    method of project financing used

2. In proper capital budgeting analysis we evaluate incremental

_  accounting income

_cash flow

_earnings

_     operating profit

3. The estimated benefits from a project are expressed as cash flows instead of income flows because:

_     it is simpler to calculate cash flows than income flows

_     it is cash, not accounting income, that is central to the firm's capital budgeting decision

_    this is required by the Internal Revenue Service

_     this is required by the Securities and Exchange Commission

4. ln estimating nafter-tax incremental operating cash flows" for a project, you should include all of the following EXCEPT:

--- sunk costs

_    opportunity cost

_    changes In working capital resulting from the project, net of spontaneous changes in C/L effects of inflation

5. A capital investment is one that

_     hasthe prospect of Jong term benefits

_     has the prospect of short term benefits

_     is only undertaken by large corporatiOns

_     applies only to investment in fixed assets

Sustainable development and the international responsibility of large multinationals in the developing world is a major issue. What do you forecast will be the strongest factors affecting the future of China and India in the context of The Atlantic article, “How Walmart is Changing in China?’ and the readings since the mid-term of Prof. Michael Santoro, Nanda Nilekani and Paul Shrivastava?

What are definitions and interpretation of Zero yield curve?

EBV is considering a $5M Series A investment in Newco. EBV proposes to structure the investment as 6M shares of convertible preferred stock. The employees of Newco have claims on 10M shares of common stock. Thus, following the Series A investment, Newco will have 10M common shares outstanding and would have 16M shares outstanding on conversion of the CP. EBV estimates a 25 percent probability for a successful exit, with an expected exit time in 5 years and an exit valuation of $500M. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits.

(a) What is your investment recommendation for EBV? (Show all steps.)

(b) How sensitive is this recommendation to different assumptions about the exit valuation and the probability of success?

(c) Given the evidence described in Chapter 7, do you think that 25 percent is an aggressive assumption about the probability of success for a first-round investment?

first national bank has assets consisting of $100 million in home equity loans with a modified duration of 2 plus $100 million in mortgages with a modified duration of 5, and liabilities of $200 million in deposits with an average modified duration of 2. The market value of FNB's assets and liabilities is very close to book value. FNB's treasurer wants to use a five-year swap (with a 4.2 modified duration) to neutralize the bank's duration position. Caculate and describe the 5-year swap position the treasurer should enter into to do so.

As a financial planner, briefly explain the difference between estate planning and making a will?

B.Mr. and Mrs. Chung both prepared wills when they were newly married and never changed them. Now, 10 years later, they have had three children. Explain why they should review and change their wills.

Compare and contrast the similarities and differences between preferred bonds and the regular corporate bonds. Please collaborate and provide some examples for illustration purpose (if applicable).

Corporate finance is important to all managers because it provides the skills managers need to identify and select the corporate strategies and individual projects that add value to their firm, forecast the funding requirements of their company, and to devise strategies for acquiring those funds. 1. Why is corporate finance important to all managers? 2. Describe the ownership types a company might have as it evolves from a start- up to a major corporation. List the advantages and disadvantages of each form. 3. What are some of the less common forms of business ownership and what are the advantages of using them?

Discuss the article Do Hedge Funds Hedge in total. Use between 6 and 10 sentences. Penmanship will have a significant effect on the grade. Organization and grammar will also count. Bullet points are not acceptable. The article is Do Hedge Funds Hedge? by Clifford Asness, Robert Krail and John Liew .

Financing Deficit Garlington Technologies Inc.'s 2016 financial statements are shown below: Balance Sheet as of December 31, 2016 Cash $ 180,000 Accounts payable $ 360,000 Receivables 360,000 Notes payable 156,000 Inventories 720,000 Line of credit 0 Total current assets $1,260,000 Accruals 180,000 Fixed assets 1,440,000 Total current liabilities $ 696,000 Common stock 1,800,000 Retained earnings 204,000 Total assets $2,700,000 Total liabilities and equity $2,700,000 Income Statement for December 31, 2016 Sales $3,600,000 Operating costs 3,279,720 EBIT $ 320,280 Interest 18,280 Pre-tax earnings $ 302,000 Taxes (40%) 120,800 Net income 181,200 Dividends $ 108,000 Suppose that in 2017 sales increase by 10% over 2016 sales and that 2017 dividends will increase to $192,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2016. Use an interest rate of 11%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations. Garlington Technologies Inc. Pro Forma Income Statement December 31, 2017 Sales $ Operating costs $ EBIT $ Interest $ Pre-tax earnings $ Taxes (40%) $ Net income $ Dividends: $ Addition to RE: $ Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2017 Cash $ Receivables $ Inventories $ Total current assets $ Fixed assets $ Total assets $ Accounts payable $ Notes payable $ Accruals $ Total current liabilities $ Common stock $ Retained earnings $ Total liabilities and equity

1. Following are the returns on two assets and three states of the economy

1. What are the expected returns and standard deviations for these two stocks?
2. What do you interpret? Which stock is riskier?

7.  7: Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles: Equipment Cost Owning

Findley Furniture Company must install $7.2 million of new equipment in one of its plants. It can obtain a bank loan for 100% of the required amount. Alternatively, management believes it can arrange a lease. Assume that the following facts apply:

1) The equipment falls in the MACRS 5-year class. The applicable MACRS rates are 20%, 32%, 19%, 12%, 11%, and 6%.

2) The lease includes maintenance, whereas if the equipment is purchased, it would require maintenance provided by a service contract for $180,000 per year, payable at the end of the year.

3) Findley’s federal-plus-state tax rate is 40%.

4) If the money is borrowed, the bank loan will be at a rate of 8%, amortized in 5 equal installments to be paid at the end of each year.

5) The tentative lease terms call for end-of-year payments of $1.25 million per year for 5 years.

6) At the end of the lease term, the equipment will have an estimated salvage value of $900,000. At that time, Findley plans to replace the equipment regardless of whether the firm leases or purchases it.

What is the firm’s cost of owning the equipment? Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in thousands. For example, an answer of $10,550,000 should be entered as 10,550. Round your answer to the nearest whole number.

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 16 % 35 % Bond fund (B) 12 15 The correlation between the fund returns is 0.13. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) a-2. What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

Greta, an elderly investor, has a degree of risk aversion of A = 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 8.4% per year, with a SD of 23.4%. The hedge fund risk premium is estimated at 13.4% with a SD of 38.4%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual returns on the S&P 500 and the hedge fund in the same year is zero, but Greta is not fully convinced by this claim.

What should be Greta’s capital allocation?
 (Do not round your intermediate calculations. Round your answers to 2 decimal places.)
a. S&P
b. Hedge
c.Risk-free Asset

You have ​$58,000. You put 17​% of your money in a stock with an expected return of 12​%, ​$35,000 in a stock with an expected return of 17​%, and the rest in a stock with an expected return of 20​%. What is the expected return of your​ portfolio?

The expected return of your portfolio is ​%. ​(Round to two decimal​ places.)