Portfolio analysis

4. Suppose you form a portfolio that invests 10% in T, 20% in JPM, 30% in NEM and 40% in CVX. Calculate (a) portfolio monthly returns, (b) portfolio's average monthly return, and (c) standard deviation of portfolio monthly returns. Discuss. Highlight your final answers.

Average Return E (r) of each stock: The average return on each of these stocks were calculated in excel using today's price-yesterdays price/yesterday's price and then the average taken from 114 days of adj. closing cost.

Ave. Return E(T)=0.85% StDEV(T)=4.46%

Ave. Return(JPM)=1.36% StDEV(JPM)=6.94%

Ave.Return E(NEM)=0.60% StDEV(NEM)10.30%

Ave. Return E(CVX)=0.90% StDEV(CVX)5.74%

Weight

WW(T)=10%

W(JPM)20%

W(NEM)30%

W(CVX)40%

E (r)ptf = W(T)*E(T) + W(JPM)*E(JPM) + W(NEM)*E(NEM)+ W(CVX)*E(CVX)

******I calculated in excel and got these answers: Is the E(r)ptf the portfolio monthly returns or the average monthly return? How do you calculate the (a) portfolio montly returns and (b) the average monthly return?

E(r) ptf=0.90%

StDEV(r) ptf=2.51%

Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $70,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labour 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 $3,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Snowy Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 10.70 percent. The project's NPV is $ .

The project should be (accept or rejected?).

(Round your intermediate calculations to three decimal places and round each of your final answers to the nearest dollar. Use parenthesis to enter negative amounts.)

Take Five Systems, a new start-up, is developing a new iPhone application (“app”) and provides you with the following assumptions:

1. Development and testing of the new app will take four months. Month five is the first month of revenue generation.

2. Initial monthly app sales of 5,000 downloads at a price of $2.99

3. Unit sales will grow at 15% per month for months six through twelve and then will be flat thereafter

4. The app will become obsolete and will need to be revised/replaced after month 18

1. Take Five Systems is concerned about the accuracy of their revenue estimates in Question 1. Specifically, they wish to use sensitivity analysis to evaluate the impact on Month 18 revenue of the following:

   1. Variations in 2% increments between 9-21% in the growth rate of unit sales in Months 5-12 (that is, 9%, 11%,..., 19%, 21%)

   2. Variationin500unitincrementsbetween2,500and7,500inthelevelofinitial sales (that is, 2,500, 3,000,..., 7,000, 7,500)

Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $50,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labour 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 $4,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Snowy Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 13.30 percent.

The project's NPV is?

The project should be accepted/rejected

• Summarize the most significant uses of the funds banks obtain; include a description of each and the risks involved. Next, discuss why a bank might invest in securities, even though loans typically generate a higher return; discuss risk as a factor. Finally, discuss how a bank might allocate funds to each type of asset and how this helps a bank to manage risk for the bank and its customers.

• Describe what is meant by bank capital and discuss how banks determine the optimal amount of capital to hold. Since a bank’s capital is generally less than 10% of its assets, discuss how this compares to the average capital structure of manufacturing corporations and explain this difference.

1. Take Five Systems, a new start-up, is developing a new iPhone application (“app”) and provides you with the following assumptions: a. Development and testing of the new app will take four months. Month five is the first month of revenue generation. b. Initial monthly app sales of 5,000 downloads at a price of $2.99 c. Unit sales will grow at 15% per month for months six through twelve and then will be flat thereafter d. The app will become obsolete and will need to be revised/replaced after month 18 Use the data provided to forecast Take Five’s monthly revenue for Months 1-18

2. Take Five Systems is concerned about the accuracy of their revenue estimates in Question 1. Specifically, they wish to use sensitivity analysis to evaluate the impact on Month 18 revenue of the following: a. Variations in 2% increments between 9-21% in the growth rate of unit sales in Months 5-12 (that is, 9%, 11%,…, 19%, 21%) b. Variation in 500 unit increments between 2,500 and 7,500 in the level of initial sales (that is, 2,500, 3,000,…, 7,000, 7,500)

could you please show me how to do question 2 on excel? Thank you

Consider the three bonds quoted in the following table (settlement: 2/15/94). Calculate discount factors and spot rates at six-month intervals (d1, d2, d3 and y1, y2, y3), and implied six month forward rates (f1 and f2).

Prof. Business wants a 22-year retirement annuity that begins 9 years from today with an equal annual payment equal to $115,000 today inflated at 2.5% annually over 9 years. Her first retirement annuity payment would occur 9 years from today. She realizes her purchasing power will decrease over time during retirement.

Prof. Business currently has $660,000 in her University retirement account. She expects these savings and any future deposits into her University and any other retirement account will earn 8% compounded annually. Also, she expects to earn 7% annual return after she retires.

Prof. Business now wants to consider retiring two years earlier in 7 years and will deposit her required University contributions each year as in question 4 and will deposit and additional $14,400 at the end of each year for the next 7 years (first deposit totals $35,400). Also, she will require a 24-year retirement annuity.

Answer from #4:

Questions:

a) How much money will Prof. Business have in her retirement account immediately after her last deposit 7 years from today?

b) What would be the equal annual payment from her 24-year retirement annuity whose first payment occurs exactly 7 years from today?

Please show work and functions on an excel spreadsheet.

Harris Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 25 percent. The purchase price is $2.4 million, required modifications to the equipment will cost $100,000. The company would depreciate the equipment over 4 years, using straight-line depreciation. A 4-year lease calls for a payment of $750,000 at the beginning of each year.   If the equipment is purchased, the company will borrow from its bank at an interest rate of 10 percent.

a. Calculate the cost of purchasing the equipment.

b. Calculate the cost of leasing the equipment.

c. Calculate the net advantage to leasing. Should the company purchase or lease the equipment?

You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales: 100,000 units per year

Unit price: $190

Variable cost: $114

Fixed cost: $4,080,000

The project will last for 10 years and requires an initial investment of $11.28 million, which will be depreciated straight-line over the project life to a final value of zero. The firm’s tax rate is 30%, and the required rate of return is 12%. However, you recognize that some of these estimates are subject to error. Sales could fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $180. The good news is that fixed costs could be as low as $2,720,000, and variable costs would decline in proportion to sales.

a. What is project NPV if all variables are as expected?

In a comprehensive fashion, present the various components of the private sector's Retirement or Pension Program. Explain the extent of its coverage and its membership. Explain how it is financed, how it pays benefits to its members. Discuss its solvency. Provide your recommendations for long-term sustainability.

Central Supply purchased a new printer for $70,000 in January of 2017. It has a fiscal yearend of December 31. The printer is expected to operate for nine years, after which it will be sold for salvage value (estimated to be $6,550).

a.      (i) How much is the depreciation expense for the year end December 2017 and for yearend December 2018 if the company uses the double-declining-balance method?

(ii) What does the disclosure look like for the Balance Sheet as it relates to the printer for the year end December 2017 and for yearend December 2018 (using the double-declining balance method)?

b.      (i) How much is the depreciation expense for the year end December 2018 if the company uses the straight-line method?

(ii) What is the amount to be disclosed on the Balance Sheet as the value for the printer for the year end December 2018 (using the straight-line method)?

Consider a PV solar power project with the following parameters:

• Initial cost: $18M for hardware + $14M for installation.

• The yearly energy produced is 24 millions kWh which will bring an income of $2.9M per year

• $0.5M per year is used for operation and maintenance.

• At the end of the 25 year time horizon, a net expenditure of $1M will be required for removal and site cleaning.

• The MARR is 7%.

a) Calculate the NPV for this investment.

b) Recalculate the NPV, this time assuming that an investment tax credit of 20% for hardware and 10% for installation costs are available.

c) Calculate the IRR for this investment (with tax incentive).

d) Calculate the levelized cost of energy (with tax incentive)