An owner of the Atrium Tower is currently negotiating a 5 year lease with ACME Corp. for 20,000 rentable SF. ACME would like a base rent of $25/SF with step-ups of $1/year beginning one year from now. a) What is the present value of cash flows to Atrium (assume A 10% discount rate) b) The owner of ATRIUM believes that the Base rent of $25/SF in (a) is too low and wants to raise that amount to $29 with the same step-ups. If so, Atrium would provide ACME with a $50,000 moving allowance and $150,000 in tenant improvements. What is the PV of this alternative and the effective rent. c) ACME informs ATRIUM it will pay $23/SF but must buyout one year left on its existing lease ($15/SF on 20,000/SF); no moving allowance or tenant Improvements. What is the PV of this alternative and the effective rent.

A corporate bond with a coupon rate of 7.2 percent has 18 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.9 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 9.2 percent. (Assume interest payments are semiannual.) What will be the change in the bond’s price in dollars? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

B&G, Inc.

A year ago, Kevin went to work for B&G, Inc. He has worked for the finance department ever since he started. He noticed that the corporation was only taxed as though it were a partnership. This was something that he found very odd when he first started working for the company, but he later realized it was a fairly common practice. He recognized that this was one of the advantages of this type of corporation.

While the job was challenging, Kevin was not happy. He wanted to work for a company whose main goal was to provide service to the community, not to make a profit. However, Kevin felt that, considering his present financial situation, he had to continue working for B&G, Inc. A week later, Kevin discovered there was going to be a merger between B&G, Inc. and one of its major competitors. Kevin's boss informed him that he would be getting a promotion and a raise. While he was excited about making more money, he still was not happy. He knew then that he would not be working for the company for long.

ABCDE

5.

Refer to B&G, Inc. What type of corporation is B&G, Inc.?

a.

Sole proprietorship

b.

Government-owned corporation

c.

S-corporation

d.

Not-for-profit corporation

e.

Cooperative

ABCDE

6.

Refer to B&G, Inc. Which of these features does not belong to this type of corporation?

a.

No double taxation

b.

Management flexibility

c.

Limited liability

d.

Personal asset protection

e.

Many Internal Revenue tax regulations

ABCDE

7.

Refer to B&G, Inc. What type of organization was Kevin considering switching to?

a.

Limited-liability corporation

b.

Government-owned corporation

c.

S-corporation

d.

Not-for-profit corporation

e.

Closed corporation

ABCDE

8.

Refer to B&G, Inc. B&G, Inc. was going through a ____ merger.

a.

vertical

b.

horizontal

c.

conglomerate

d.

hostile

e.

leveraged

ABCDE

9.

Refer to B&G, Inc. If the company had decided to let the managers have the opportunity to purchase the company and take it private with borrowed funds instead of this merger with a competitor, it would have been considered a

a.

leveraged buyout.

b.

proxy buyout.

c.

tender buyout.

d.

cooperative buyout.

e.

simple buyout.

What are the no-arbitrage conditions for:

Two –point arbitrage

Three-point arbitrage

You are considering the purchase of an office building. You have gathered information, surveyed the market, and made predictions. Assume you plan to purchase the property on January 1, 2020 and sell the property on December 31, 2024. Other assumptions:

Total acquisition price: $931,000.
Property consists of 10 office suites, 5 on the first floor and 5 on the second.
Contract rents: 5 suites at $1,831 per month and 5 at $1,431 per month.
Annual market rent increases: 2.31 % per year (first increase on 01/01/2021)
Vacancy and collection losses: 5.31% per year.
Operating expenses: 35% of effective gross income each year.
Capital expenditures: 5.31% of expected gross income each year.
Expected holding period: 5 years.
Property value is expected to increase 5.5% per year.
Selling expenses are expected to be 7.31% of selling price.
Loan information: 75% LTV, 7.31%, 30 years
Up-front financing costs: 3.31% of loan amount.
Depreciation: 90% of the acquisition price
Ordinary income tax rate: 22%
Capital gain tax rate: 15%
Depreciation recapture rate: 25%

What are the After-Tax cash flows for years 1-5?

please include the steps!

Your company has projected the following numbers for the third quarter of the year:

Collections occur as follows: 15% pay within the month of sale, 65% pay during the month following the sale, and 20% pay in the second month following the sale. Payments for labor and raw materials occur in the month following the purchase. Salaries and general expense run $15,000 per month, lease payments are $5,000 per month, depreciation charges are $7,500 per month, miscellaneous expense are $2,000 per month. An income tax payment of $25,000 is due in September. Cash on hand on July 1 is $25,000 and the company must maintain a minimum balance of $25,000. Prepare a cash budget for the third quarter of July, August, and September.

Critically analyse the three pillars with respect to the Basel Accords

In view of the increasing complexities in the different financial products and services review whether conduct of business regulation should widen to specifically cover incorporated institutions as well as the smaller consumers.

Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows:

Mr. is likely to hold the apartment complex of his choice for about 25 years and will use this period for decision making purposes. Either apartment can be purchased for $140,000. Mr. Backster uses risk-adjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation ( for other types of investments, he also considers other measures).

a) compute the risk-adjusted net present value for Windy Acres and Hillcrest Apartments.

b) Which investment should Mr. Backster accept if the two investments are mutually exclusive? If the investments are not mutually exclusive and no capital rationing is involved, how would your decision be affected?

Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $3.00000 dividend at that time (D₃ = $3.00000) and believes that the dividend will grow by 15.60000% for the following two years (D₄ and D₅). However, after the fifth year, she expects Goodwin’s dividend to grow at a constant rate of 3.78000% per year. Goodwin’s required return is 12.60000%. Fill in the following chart to determine Goodwin’s horizon value at the horizon date (when constant growth begins) and the current intrinsic value. To increase the accuracy of your calculations, do not round your intermediate calculations, but round all final answers to two decimal places.

Horizon Value:

Current Intrinsic Value:

Assuming that the markets are in equilibrium, Goodwin’s current expected dividend yield is ,_____ and Goodwin’s capital gains yield is ______

. Goodwin has been very successful, but it hasn’t paid a dividend yet. It circulates a report to its key investors containing the following statement: Goodwin’s investment opportunities are poor. Is this statement a possible explanation for why the firm hasn’t paid a dividend yet? No Yes

Consider a bond with a coupon rate of 8 percent that pays semiannual coupon and matures in eight years. The market rate of return on bonds of this risk is currently 10 percent. What is the current value of a $1,000 face value bond?

$891.62

$830.58

$854.08

$843.07

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

R_A = 2.8% + 1.00R_M + e_A

R_B = –1.0% + 1.30R_M + e_B

σ_M = 18%; R-square_A = 0.27; R-square_B = 0.13

Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B.

a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.

c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.)

d. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.

Constant Growth Valuation

Crisp Cookware's common stock is expected to pay a dividend of $1.5 a share at the end of this year (D₁ = $1.50); its beta is 1.05. The risk-free rate is 4.9% and the market risk premium is 6%. The dividend is expected to grow at some constant rate g_L, and the stock currently sells for $47 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years (i.e., what is P3)? Do not round intermediate steps. Round your answer to the nearest cent.

A company currently pays a dividend of $1.75 per share (D₀ = $1.75). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.95, the risk-free rate is 6.5%, and the market risk premium is 4%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.