Your friend David has just bought a futures contract on a stock index, and the contract specifies one year to expiration. The current share price is $80, and the annually compounded interest rate is 10%. The stock will pay quarterly dividends of $2 during the next year, with dividends payments on the following dates:

• January 25
• April 25
• July 25
• October 25

Assume that this is a non-leap year.

1. What is the futures price on this contract on January 3?

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 4.5%. The probability distributions of the risky funds are:

The correlation between the fund returns is .0517.

What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Company Z’s earnings and dividends per share are expected to grow by 3% per year for the next 4 years, then stop growing. In year 5 and after, it will pay out all earnings as dividends. Assume next year’s dividend is $3, the market capitalization rate is 10%, and next year’s EPS = $10. What is Company Z’s stock price?

Please explain answer and solution clearly

Assume a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 34%.

Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 2.1%, and one-half have an alpha of –2.1%. The analyst then buys $1.4 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.4 million of an equally weighted portfolio of the negative-alpha stocks.

a. What is the expected return (in dollars), and what is the standard deviation of the analyst’s profit? (Enter your answers in dollars not in millions. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

b-1. How does your answer change if the analyst examines 50 stocks instead of 20? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

Standard deviation            $

b-2. How does your answer change if the analyst examines 100 stocks instead of 20? (Enter your answer in dollars not in millions.)

Standard deviation            $

why does the financial sector have such low asset turnover ratios compared to other industries?
why is the asset turnover ratio important for financial companies?

John makes regular $2000 deposits in his savings account every year for the next 10 years, starting today(total 11 deposits). The bank will pay annual intrest rate of 5% for the next 10 years and will increase the intrest rate to 10%, thereafter. When will John have $100,000 in his account?

Please show all working with formulas. Don't solve it through excel.

ABC is considering purchasing a smaller chain, XYZ software. ABC’s financial analysts project that the merger will result in incremental net cash flows of $5.5 million in Year 1, $6.5 million in Year 2, $8.5 million in Year 3, and $15.5 million in year 4. Interest tax savings after the merger are estimated to be $1.8 million for each of the next 4 years. The expected cost of capital will be 10.5%, and the company expects to experience a normal growth of 6% starting at the beginning of the fifth year. XYZ’s outstanding debt is estimated to be $40 million, and the post-merger beta is estimated to be 1.50. The risk-free rate is 3.5 percent, and the market returns are 10 percent. What is the value of XYZ Software to ABC software? in excel spreadsheet please

rookie quarterback is negotiating his first NFL contract. His opportunity cost is 8%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows:

As his adviser, which contract would you recommend that he accept?

Select the correct answer.

REPLACEMENT ANALYSIS

The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $650,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $280,000. The old machine is being depreciated by $130,000 per year, using the straight-line method.

The new machine has a purchase price of $1,125,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $135,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $215,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC.

1. What initial cash outlay is required for the new machine? Round your answer to the nearest dollar. Negative amount should be indicated by a minus sign.
   $
   
2. Calculate the annual depreciation allowances for both machines and compute the change in the annual depreciation expense if the replacement is made. Round your answers to the nearest dollar.

   Year	Depreciation Allowance, New	Depreciation Allowance, Old	Change in Depreciation
   1	$	$	$
   2
   3
   4
   5

3. What are the incremental net cash flows in Years 1 through 5? Round your answers to the nearest dollar.

   Year 1	Year 2	Year 3	Year 4	Year 5
   $	$	$	$	$

4. Should the firm purchase the new machine?

4. 
   
   Support your answer. The input in the box below will not be graded, but may be reviewed and considered by your instructor.
   
5. In general, how would each of the following factors affect the investment decision, and how should each be treated?
   1. The expected life of the existing machine decreases.

   The input in the box below will not be graded, but may be reviewed and considered by your instructor.

   2. The WACC is not constant, but is increasing as Bigbee adds more projects into its capital budget for the year.

   The input in the box below will not be graded, but may be reviewed and considered by your instructor.

MIRR unequal lives. Singing Fish Fine Foods has ​$2,090,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the​ store's deli section for additional food service. The estimated​ after-tax cash flow of this project is ​$580,000 per year for the next five years. Project 2 is updating the​ store's wine section. The estimated annual​ after-tax cash flow for this project is ​$510,000 for the next six years. The appropriate discount rate for the deli expansion is 9.4​% and the appropriate discount rate for the wine section is 8.8​%. What are the MIRRs for the Singing Fish Fine Foods​ projects? What are the MIRRs when you adjust for unequal​ lives? Do the MIRR adjusted for unequal lives change the decision based on​ MIRRs? ​Hint: Take all cash flows to the same ending period as the longest project.

A. If the appropriate reinvestment rate for the deli expansion is 9.49​%, what is the MIRR of the deli​ expansion?

B. If the appropriate reinvestment rate of the wine section is 8.8%, What is the MIRR of the wine section?

C. What is the MIRR adjusted for unequal lives of the deli expansion?

D. What is the MIRR adjusted for unequal lives of the wine section?

Suppose Proctor​ & Gamble​ (P&G) is considering purchasing

$ 18$18

million in new manufacturing equipment. If it purchases the​ equipment, it will depreciate it for tax purposes on a​ straight-line basis over five​ years, after which the equipment will be worthless. It will also be responsible for maintenance expenses of

$ 1.00$1.00

million per​ year, paid in each of years 1 through 5. It can also lease the equipment under a true tax lease for

​$4.54.5

million per year for the five​ years, in which case the lessor will provide necessary maintenance. Assume​ P&G's tax rate is

30 %30%

and its borrowing cost is

7.0 %7.0%.

a. What is the NPV associated with leasing the equipment versus financing it with the​ lease-equivalent loan?

b. What is the​ break-even lease

ratelong dash—that

​is, what lease amount could​ P&G pay each year and be indifferent between leasing and financing a​ purchase?

SkyTech Ltd. is expected to pay a per-share dividend next year of $30. The market’s consensus is that the firm’s dividend growth rate of 2% per year will be maintained in the foreseeable future. SkyTech’s cost of equity is 10% per year.

(a) What is the price of a share of SkyTech?                                

(b) Suppose SkyTech’s internal view is that it has an expected average yearly dividend growth     of 2% because its return on equity is 8% and management retains 25% of earnings. What is the earnings per share of SkyTech next year? What is the present value of growth opportunities per share of SkyTech?                                                 

(c)    Suppose SkyTech is about to announce that it will increase its retention ratio to 50%,       effective immediately. If the market is still unaware of SkyTech’s decision, what will be the new value of the stock after the change in policy? How would you invest to profit        from this fact?                                                      

(d)   If the dividend policy of SkyTech Ltd. has not shown a clear relationship to its earnings growth, what other absolute valuation model can you use to value the company? What cash        flows should be used in the valuation?