Q1: what does the efficient frontier represents?

Q2: how do we estimate the return and standard deviation of a newly built portfolio from analyzing the stocks in that portfolio?

Q3: in the regression equation, what is meant by a regression that has an R-square with 0.95 and how does it compare with a regression with a R-square of 0.30?

Q4: why do we use adjusted beta?

Q5: what is the information ratio and why do we use it?

If a bank has a Liquidity Coverage Ratio of 104%, and HQLA of $45,650,000, how much does the bank expect to run off in cash flow during the next 30 days?

Ans: ________________________

A bank has an NSFR of 178%. How much more stable capital does the bank have compared to its RSF, if the required amount is $1.673 billion?   Ans: _______________________________

7) Steinway has expected earnings before interest and taxes of $1,360,000, an unlevered cost of capital of 9.8 percent, and a tax rate of 25 percent. The company has $1,200,000 of debt that carries a 6.4 percent coupon. The debt is selling at par value. Assume the firm maintains this debt amount forever. What is the interest tax shield of the firm in a given year? What is the value of the firm?

A)$18,900 and $10,475,216

B)$18,600 and $10,475,216

C)$18,600 and $11,328,410

D)$19,200 and $11,328,410

E)$19,200 and $10,708,163

8)Yankee Company is currently an all equity firm. Its current cost of equity is 10.4 percent and the tax rate is 25 percent. The firm has 1,700,000 shares of stock outstanding with a market price of $46 a share. The firm is considering capital restructuring that allows $12 million of debt with a coupon rate of 6.4 percent. The debt will be sold at par value and the proceeds will be used to repurchase shares. What is the value per share after the recapitalization? (Hint: You need to determine the total value of equity after recapitalization that accounts for the PV of interest tax shield and the number of shares outstanding after repurchased)

A)$49.27

B)$48.08

C)$47.15

D)$46.50

E)$50.33

1. Suppose the market value of risky and risk free bonds is initially $850 with a corresponding return of 17.6 %, illustratively discuss the probable reaction of bond buyers and sellers when corporate bonds become riskier to such an extent that the market value of corporate bonds falls to $800 with a corresponding 25% rate of return. If the response of buyers causes the price of risk-free bonds to rise to$900 with a corresponding 11.1 % rate of return, derive the risk premium.

5)Harpoon is an unlevered firm. It has expected earnings of $570,000 and a market value of equity of $5,020,000. The firm is planning to issue $2,560,000 of debt at 6.4 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?

A)15.45%

B)15.71%

C)15.90%

D)16.28%

E)16.51%

6)Rockport is an unlevered firm with a total market value of $5,700,000 with 300,000 shares of stock outstanding. The firm has expected EBIT of $420,000 if the economy is normal and $680,000 if the economy booms. The firm is considering a $2,400,000 bond issue with an attached interest rate of 6.2 percent. The bond proceeds will be used to repurchase shares. Ignore taxes. What will the earnings per share be after the repurchase if the economy booms?

A)$3.38

B)$3.29

C)$3.06

D)$2.82

E)$2.67

Alpha Enterprises, Inc. has a WACC of 14.50% and is considering a project that requires a cash outlay of $1,950 now with cash inflows of $675 at the end of year 1, $600 at the end of year 2, $725 at the end of year 3, $700 at the end of year 4, and $750 at the end of year 5. What is the project's NPV?

You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $1.38 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $1,480,000 on an aftertax basis. In four years, the land could be sold for $1,580,000 after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $123,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,500, 5,100, and 4,000 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $630 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ feels that fixed costs for the project will be $415,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $3.30 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $390,000. Net working capital of $123,000 will be required immediately. PUTZ has a 40 percent tax rate, and the required return on the project is 13 percent. Assume the company has other profitable projects. MACRS schedule. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Problem 12-92A
Preparation of Ratios

The financial statements for Burch Industries follow:

Use the following data to respond to the requirements below.

6. Perform a Dupont analysis for 2018 and 2019. Round your intermediate calculations and final answers to two decimal places.

Problem 6-55 Amortization with Equal Payments [LO3]

Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firm’s equity beta is 1.40, the risk-free rate is 2.20 percent, and the market risk premium is 6.4 percent.

a. Using these values, estimate the current share price of Beagle Beauties stock according to the constant dividend growth model. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. If The required return is 12.82 percent. Use the clean surplus relationship to calculate the share price for Beagle Beauties with the residual income model. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Compensating balance versus discount loan   Weathers Catering​ Supply, Inc., needs to borrow $ 145,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 9.1 % subject to a 9.9 % compensating balance.  ​(​Note: Weathers currently maintains $ 0 on deposit in State​ Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 9.1 % with​ discount-loan terms. The principal of both loans would be payable at maturity as a single sum.

a.  Calculate the effective annual rate of interest on each loan.

b.  What could Weathers do that would reduce the effective annual rate on the State Bank​ loan?

You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,370,000. Over the past five years, the price of land in the area has increased 5 percent per year, with an annual standard deviation of 28 percent. You have approached a buyer and would like the option to sell the land in 12 months for $1,520,000. The risk-free rate of interest is 3 percent per year, compounded continuously. What is the price of the put option necessary to guarantee your sales price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

a. Calculate the future sum of 8,000​, given that it will be held in the bank for 77 years at an APR of 66 percent.

​b. Recalculate part (a) using compounding periods that are​ (1) semiannual and​ (2) bimonthly​ (every two​ months).

c. Recalculate parts (a​) and (b​) for an APR of 12percent.

d. Recalculate part (a​) using a time horizon of 14 years​ (the APR is still 66 percent).

e. With respect to the effect of changes in the stated interest rate and holding periods on future sums in parts (c​) and (d​), what conclusions do you draw when you compare these figures with the answers found in parts (a​) and (b​)?

Using the stock prices in Problem 3, calculate the exponential three-month moving average for both stocks where two-thirds of the average weight is placed on the most recent price.

Suppose you are going to receive $13,600 per year for five years. The appropriate interest rate is 8.5 percent. a-1 What is the present value of the payments if they are in the form of an ordinary annuity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ a-2 What is the present value if the payments are an annuity due? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ b-1 Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $ b-2 Suppose you plan to invest the payments for five years. What is the future value if the payments are an annuity due? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $