What changes in the investor’s circumstances cause the rebalancing of the investment portfolio? Explain why.
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(All figures in thousands) The Accessories Outlet has total equity of $286,000 sales of $508,000, and a profit margin of 4.5%. It pays $9,144 in dividends. Equity multiplier of 1.6. What is the return on equity, ROA, TAT and ROE for this company?
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1. Evaluate how some of the tried-and-true strategies for merging companies will get the job done.
2. In applying advanced analytics, asset effectiveness will achieve a level that is unachievable with traditional levers. Explain the term “asset effectiveness” and evaluate the traditional levels in asset effectiveness. (both question subject is related to Corporate Finance).
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. An investor can design a risky portfolio based on two stocks, A and B. Stock A has an
expected return of 18% and a standard deviation of return of 20%. Stock B has an expected
return of 14% and a standard deviation of return of 5%. The correlation coefficient between the
returns of A and B is 0.50. The risk free rate of return is 10%.
What is the Sharpe ratio of the optimal risky portfolio
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You have just received a job offer at an investment bank, an dare offered the 2 salary options.Both are for 2 years, with the salary to be paid in equal amounts at the end of the month.
Option 1 is $75,000 per year for 2 years. Option 2 is $64,000 per year for 2 years, and a signing bonus of $20,000 to be paid immediately.
The appropriate interest rate is 7% per year.
Which option should you choose.
Please show the calculate inputs.
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Which stock, A or B, or both of them, is preferable to add to the diversified portfolio, and why? if the information about each stock as follows:
stock A: Average annual return-117.4, Average return 11.7%, Standard deviation 8.9, Coefficient of variation 0.8, Required return 11.8, beta 1.6
stock B: Average annual return-111.4, Average return 11.1%, Standard deviation 2.7, Coefficient of variation 0.2, Required return 10.3, beta 1.1
Risk free rate 7%
Market return 10%
Covariance 11.95
Correlation coefficient 0.48
Return on a portfolio (with both stocks A and B) 11.44
Standard deviation of a portfolio 5.26
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3
. An investor can design a risky portfolio based on two stocks, A and B. Stock A has an
expected return of 18% and a standard deviation of return of 20%. Stock B has an expected
return of 14% and a standard deviation of return of 5%. The correlation coefficient between the
returns of A and B is 0.25. The risk free rate of return is 10%.
What proportion of the optimal risky portfolio should be invested in stock? (please no answers in excel, only typed out)
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Respond to the following scenario: A prospective client comes into your office looking for investment advice. The client feels that she or he is appropriately diversified because the portfolio currently holds six different growth mutual funds, hence a large variety of equity securities.
a. Is this diversification?
b. How would you measure diversification between funds?
c. If this prospective client was 32 years old, and the funds in question were part of retirement savings, what would you advise the client regarding having an adequately diversified mutual fund portfolio?
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You are evaluating two different silicon wafer milling machines. The Techron I costs $297,000, has a three-year life, and has pretax operating costs of $82,000 per year. The Techron II costs $515,000, has a five-year life, and has pretax operating costs of $55,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $59,000. If your tax rate is 23 percent and your discount rate is 11 percent, compute the EAC for both machines. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Techron I
Techron II
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Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $332,233 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $110,000 per year until it reaches $1,320,000, where it will remain. The required return is 15%.
What is the NPV if the company decides to wait 2 years to purchases the machine? (Round answer to 2 decimal places. Do not round intermediate calculations)
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Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $326,094 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $110,000 per year until it reaches $1,320,000, where it will remain. The required return is 16%.
What is the NPV if the company purchases the machine today? (Round answer to 2 decimal places. Do not round intermediate calculations)
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White Rock Services Inc. has an opportunity to make an investment with the following projected cash flows.
|
Year |
Cash Flow |
|
0 |
$1,680,000 |
|
1 |
−3,885,000 |
|
2 |
2,225,027 |
a. Calculate the NPV at the following discount rates and plot an NPV profile for this investment: 0%, 5%, 7.5%,10%,15%,20%,22.5%,25%,30%.
b. What does the NPV profile tell you about this investment's IRR?
c. If the company follows the IRR decision rule and their cost of capital is 15%, should they accept or reject the opportunity? Why is it hard to make a decision on this investment based solely on the IRR rule?
d. If the company's cost of capital is 15%, should they reject or accept the investment based on its NPV?
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What is the "opening price point"? how is it used to increase sales at Walmart?
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The interest rate is 8%.
When you are 30, you want to deposit $X in your retirement account so that when you retire in 35 years you can withdraw $100,000 every year for 20 years (first withdrawal is at year 36).
How much is X?
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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 5.4%. The probability distributions of the risky funds are:
| Expected Return | Standard Deviation | |
| Stock fund (S) | 15% | 44% |
| Bond fund (B) | 8% | 38% |
The correlation between the fund returns is .0684.
A) Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL. -What is the standard deviation of your portfolio?
B) What is the proportion invested in the T-bill fund?
C) What is the proportion invested in each of the two risky funds?
Stock %
Bonds %
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