Joni is a financial planner for ABC firm. She provided all of her clients with the same products.
She felt this was OK since she had thoroughly researched them years ago and found them to be
excellent. By concentrating her recommendations with a few firms, she was able to receive
commission bonuses. She never discussed their goals and characteristics with her clients unless
they brought them up. Explain her violations of SEC and CFP regulations. Indicate what should
be done.
Case Analysis
Problems
Solutions
Recommendations
Conclusion
In: Finance
Suppose you plan to retire in 40 years. If you make 10 annual investments of $ 5,000 into your retirement account for the first 10 years, and no more contributions to the account for the remaining 30 years. If the retirement account earns a fixed 11% annual interest, how much will you have at your retirement? Round it to two decimal places without the $ sign, e.g., 1234567.89.
In: Finance
In: Finance
Use the bond term's below to answer the question
Maturity 7 years
Coupon Rate 4%
Face value $1,000
Annual Coupons
YTM 4%
Assuming the YTM remains constant throughout the bond's life, what
is the bond's current yield between periods 2 and 3 ?
A. 4.12%
B. 3.81%
C. 4.00%
D. 3.92%
In: Finance
In: Finance
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 sure rate of 4.3%. The probability distributions of
the risky funds are:
| Expected Return | Standard Deviation | |||
| Stock fund (S) | 13 | % | 34 | % |
| Bond fund (B) | 6 | % | 27 | % |
The correlation between the fund returns is .0630.
Suppose now that your portfolio must yield an expected return of
11% and be efficient, that is, on the best feasible CAL.
a. What is the standard deviation of your
portfolio? (Do not round intermediate calculations. Round
your answer to 2 decimal places
b. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b.1 What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
In: Finance
Compute the cost of not taking the following cash discounts.
(Use a 360-day year. Do not round intermediate
calculations. Input your final answers as a percent rounded to 2
decimal places.)
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In: Finance
Consider a newlywed who is planning a wedding anniversary gift of a trip to Canada for her husband at the end of 10 years. She will have enough to pay for the trip if she invests $4,000 per year until that anniversary and plans to make her first $4,000 investment on their first anniversary. Assume her investment earns a 7 percent interest rate, how much will she have saved for their trip if the interest is compounded in each of the following ways?
a. Annually
b. Quarterly
c. Monthly
In: Finance
|
We are evaluating a project that costs $868,000, has a life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 84,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $879,284 per year. The tax rate is 23 percent, and we require a return of 18 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 14 percent. |
| a. Calculate the best-case NPV. |
| b. Calculate the worst-case NPV. |
In: Finance
Assume sales for Peach Street Industries are expected to increase by 8.00% from 2015 to 2016. Peach Street is operating at full capacity currently and expected assets-to-sales and spontaneous liabilities-to-sales to remain the same. Additionally, the firm is looking to maintain their 2015 net profit margin and dividend payout ratios for 2016. The firm’s tax rate is 35.00% and selected income statement and balance sheet information for 2015 is provided below:
| Entry | Value | Entry | Value |
|---|---|---|---|
| Current Assets | $800.00 | Sales | $2,500.00 |
| Net Fixed Assets (NFA) | $700.00 | Operating Costs | $2,030.00 |
| Total Assets | $1,500.00 | Depreciation | $90.00 |
| Accounts Payable and Accruals | $30.00 | Interest Expense | $69.00 |
| Notes Payable | $180.00 | Dividends Paid | $93.30 |
| Long term debt | $510.00 | ||
| Total Equity | $780.00 |
How much in additional funds (external capital) will Peach Street Industries need in 2016 to support their projected growth in sales? (i.e., calculate the firm’s additional funds needed --AFN) ?
In: Finance
|
We are evaluating a project that costs $856,000, has a life of 9 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 157,000 units per year. Price per unit is $41, variable cost per unit is $25, and fixed costs are $865,416 per year. The tax rate is 22 percent, and we require a return of 18 percent on this project. |
| 1a. Calculate the accounting break-even point. |
|
1b. What is the degree of operating leverage at the accounting break-even point? |
| 2a. Calculate the base-case cash flow. |
| 2b. Calculate the NPV. |
|
2c. What is the sensitivity of NPV to changes in the quantity sold? |
|
2d. What your answer tells you about a 500-unit decrease in the quantity sold? |
|
3a. What is the sensitivity of OCF to changes in the variable cost figure? |
|
3b. How much will OCF change if variable costs decrease by $1? |
In: Finance
|
Consider a project with the following data: Accounting break-even quantity = 13,700 units; cash break-even quantity = 9,600 units; life = five years; fixed costs = $185,000; variable costs = $23 per unit; required return = 12 percent. Ignoring the effect of taxes, find the financial break-even quantity. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
In: Finance
| Suppose you are offered $8,000 today but must make the following payments: |
| Year | Cash Flows ($) | ||
| 0 | $ 8,000 | ||
| 1 | −4,300 | ||
| 2 | −3,000 | ||
| 3 | −2,100 | ||
| 4 | −1,300 | ||
| a. | What is the IRR of this offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | If the appropriate discount rate is 13 percent, should you accept this offer? |
|
| c. | If the appropriate discount rate is 20 percent, should you accept this offer? |
|
| d-1. |
What is the NPV of the offer if the appropriate discount rate is 13 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| d-2. | What is the NPV of the offer if the appropriate discount rate is 20 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
In: Finance
|
With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a “surf lifestyle for the home.” With limited capital, they decided to focus on surf print table and floor lamps to accent people’s homes. They projected unit sales of these lamps to be 8,600 in the first year, with growth of 8 percent each year for the following four years (Years 2 through 5). Production of these lamps will require $51,000 in networking capital to start. Total fixed costs are $111,000 per year, variable production costs are $24 per unit, and the units are priced at $52 each. The equipment needed to begin production will cost $191,000. The equipment will be depreciated using the straight-line method over a five-year life and is not expected to have a salvage value. The effective tax rate is 35 percent, and the required rate of return is 25 percent. What is the NPV of this project? |
In: Finance
You are eyeing an investment in Treasury Notes for a full lot (i.e. PAR=$100,000), and find a note with a maturity of 5 years. This particular Treasury has a YTM of 1.11%, and a stated rate of interest of 0.96% with a maturity of 5 years. The market price of this treasury is closest to?
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