2.Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one-year Treasury rate: Loan amount: $200,000 Annual rate cap: 1% Life-of-loan cap: 4% Margin : 2.50% First-year teaser rate: 5.50% One-year Treasury rate at end of year 1: 5.25% One-year Treasury rate at end of year 2: 5.50% Loan term in years: 15 Given these assumptions, calculate the following: a.Initial monthly payment b.Loan balance end of year 1 c.Year 2 contract rate d.Year 2 monthly payment e.Loan balance end of year 2 f.Year 3 contract rate g.Year 3 payment

Use the geometric series to derive the present value of an annuity due.

Break-even calculations are most often concerned with the effect of a shortfall in sales, but they could equally well focus on any other component of cash flow. Dog Days is considering a proposal to produce and market a caviar-flavored dog food. It will involve an initial investment of $90,000 that can be depreciated for tax straight- line over 10 years. In each of years 1 to 10, the project is forecast to produce sales of $100,000 and to incur variable costs of 50% of sales and fixed costs of $30,000. The corporate tax rate is 30%, and the cost of capital is 10%.

1. a) Calculate the NPV and accounting break-even levels of fixed costs.

2. b) Suppose that you are worried that the corporate tax rate will be increased immediately after you commit

   to the project. Calculate the break-even rate of taxes.

3. c) How would a rise in the tax rate affect the accounting break-even point?

AAPL paid $4.68 in dividend last year. The company has EPS of 15.6, ROE of 16% and required 12.7% rate of return. What is the forward P/E ratio for AAPL?

Please do this in excel and show formulas.

In 300 words, Under what circumstances would it be appropriate for a firm to use different costs of capital for its different operating divisions? If the overall firm WACC were used as a hurdle rate for all divisions, would the riskier divisions or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are the two techniques you would use to develop a rough estimate for each division’s cost of capital?

explain why maximizing profits falls short of maximizing shareholders wealth

A bond has a 10% coupon rate, payable quarterly. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 14%. What is the price of the bonds?

In no more than 300 words, explain why the quality of corporate governance is relevant to the effective management of educational institutions.

Financial intermediaries play a major role in the financial markets . without financial intermediaries being in place, some financial market transactions may not occur smoothly. Required:

a) Explain and discuss the functions of financial intermediaries in the economy

b) Identify and discuss the relative advantage and disadvantages of financial intermediations and disintermediation

Comment on the major challenges to Basel II implementation in the Caribbean in relation to credit risk management.

MM with Corporate Taxes

Companies U and L are identical in every respect except that U is unlevered while L has $16 million of 6% bonds outstanding. Assume: (1) All of the MM assumptions are met. (2) Both firms are subject to a 25% federal-plus-state corporate tax rate. (3) EBIT is $4 million. (4) The unlevered cost of equity is 10%.

1. What value would MM now estimate for each firm? (Hint: Use Proposition I.) Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places.

   Company U: $   million
   Company L: $   million

2. What is r_s for Firm U? Round your answer to one decimal place.

   %

   What is r_s for Firm L? Do not round intermediate calculations. Round your answer to one decimal place.

   %

3. Find S_L, and then show that S_L + D = V_L results in the same value as obtained in Part a. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places.

   S_L = $   million

   S_L + D = $   million

4. What is the WACC for Firm U? Do not round intermediate calculations. Round your answer to two decimal places.

   %

   What is the WACC for Firm L? Do not round intermediate calculations. Round your answer to two decimal places.

   %

Q4) Why is it important to establish a time limit for a new business to generate a profit?

Virtual bank is defined as a bank which primarily delivers retail banking services

through the internet or other forms of electronic channels instead of physical branches.

(300 word)