If you were asked to graph or quantify the risk of owning IBM stock, how would you do it? What is your preferred measure of risk? How would you demonstrate that your metric captures risk adequately? Identify several S&P listed companies that you consider to be risky investments? How does rising global turmoil influence risk? The price of gold? The price of U.S. Treasury bonds? U.S. equities? Which is a riskier asset, a 3-month U.S. Treasury bond or a 10-year U.S. Treasury bond? Explain. What factors could push the yield on 6-month U.S. Treasury higher than the 10-year U.S. Treasury bond.

You are the financial manager of a multinational corporation and you are contemplating new investments in production facilities in China. What are the risks and/or concerns of investing in production facilities in China amidst the US-China trade war that began early in 2018?

1. In the context of the “international debt crisis”, why were MNCs, international banks and national governments of less developed countries eager to utilize debt-for-equity swaps?

GM, Ford, and Tesla are automobile companies. Or are they? Explain how valuing Tesla and Ford may differ from valuing GM? Which stock is the most expensive? How did you determine which company was the most expensive? Do you think intangible assets are a larger share of total company assets today than 3-4 decades ago? How has this change made the valuation of business more difficult or easier? How could or would you measure intangible assets of a publicly listed firm? What type of companies have a large share of their assets tied up in intangibles (e.g. manufacturing, retailers, etc.). Explain why this is likely the case.

Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to answers different from those presented here. For long-term loans, the differences may be pronounced. Assume that you take out a $2000 loan for 30 months at 9.5% APR. What is the monthly payment? What is the first month interest?

1. A firm is solely financed by equity with market value of $50,000 and cost of equity of 10%. It wishes to raise another $50,000 via corporate bonds with cost of debt of 5% and keep it as cash. Hold investment policies fixed.
   1. In a MM world without taxes,
      1. What would the firm value be after debt issuance in a? Firm Value = Equity Value + Debt Value – Cash.
      2. What would be the cost of equity after debt is raised?
      3. What would be the WACC after debt is raised?
   2. In a MM world with taxes of 40%,
      1. What would be the cost of equity after debt is raised?
      2. What would be the additional value created by debt?
      3. What would be the WACC after debt is raised?

1. Lawson is a U.K- based wine and spirits company. It seeks to create a fine wine division to enhance its portfolio of global properties. The CFO is scrutinizing a proposal to make an investment in a vineyard in Chile. It requires the purchase of 20 acres of vineyards in the Maipo valley and setting up the requisite infrastructure for processing grapes and bottling wine. The project is expected to last five years, after which an exit through its sale to a local affiliate is assumed. The following table lists the cash flows denominated in the Chilean peso (CLP). Assume spot GBPCLP = 600

a. The appropriate CLP discount rate for projects of this nature is 15 percent. What is project NPV in CLP?

   b. Assume that GBPCLP remains constant at 600. Convert project cash flows into GBP (pounds). Using Lawson’s GBP WACC of 10 percent, calculate the project NPV in GBP.

Please show work and formulas used. Than You!

XCo has 400 shares outstanding. It earns $1,000 per year and will use all $1,000 to repurchase its shares in the open market rather than pay dividends, required return = 10%. how many shares will be outstanding at the end of year 1, after the first share repurchase.

A) 393.9

B) 383.8

C) 373.7

D) 363.6

E) 353.5

Over the years we have seen large changes in US federal income tax rates, with the highest marginal rates falling from 70% to under 40% today. Describe the impact of this change on the spread between US Treasury bonds and municipal bonds.

You are considering making a movie. The movie is expected to cost $10.3 million up front and take a year to produce. After​ that, it is expected to make $4.6 million in the year it is released and $1.9 million for the following four years. What is the payback period of this​ investment? If you require a payback period of two​ years, will you make the​ movie? Does the movie have positive NPV if the cost of capital is 10.9%​?

The company provides a reconciliation of the $5.66 EPS figures to the income statement’s reported EPS figure of $8.78. Also referred to as “Core EPS” in a PepsiCo-related press release, this figure, $5.66, is a non-GAAP financial measure many companies choose to report. What does a non-GAAP financial measure mean? What does the terminology “core” suggest to you? What is the reason that many companies provide non-GAAP financial information in their financial reports?

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,000,000, and it would cost another $17,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $597,000. The machine would require an increase in net working capital (inventory) of $11,500. The sprayer would not change revenues, but it is expected to save the firm $356,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.

1. What is the Year 0 net cash flow?
   $
2. 
   
3. 
   
4. 
   
5. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Year 1	$
   Year 2	$
   Year 3	$

6. 
   
7. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
8. 
   
9. 
   
10. 
    
11. If the project's cost of capital is 10 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
    $