How can I find out the tangency portfolio base on the info state.

Rini Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce after-tax cash flows of $35 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce after-tax cash flows of $35 million per year. Rini plans to serve the route for 10 years. The company’s WACC is 15%. If Rini needs to purchase a new Plane A, the cost will be $110 million, but cash inflows will remain the same. Should Rinie acquire Plane A or Plane B? Explain your answer. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answer to two decimal places.

Plane -Select- (A, B) is the better project and will increase the company's value by $   millions.

Brandon is an analyst at a wealth management firm. One of his clients holds a $7,500 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table:

Brandon calculated the portfolio’s beta as 0.878 and the portfolio’s expected return as 8.8290%.

Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%.

According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round your intermediate calculations.)

0.5566 percentage points

0.3775 percentage points

0.4840 percentage points

0.6002 percentage points

Analysts’ estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and judgmental factors, because different analysts interpret data in different ways.

Suppose, based on the earnings consensus of stock analysts, Brandon expects a return of 6.85% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued?

Fairly valued

Overvalued

Undervalued

Suppose instead of replacing Atteric Inc.’s stock with Transfer Fuels Co.’s stock, Brandon considers replacing Atteric Inc.’s stock with the equal dollar allocation to shares of Company X’s stock that has a higher beta than Atteric Inc. If everything else remains constant, the required return from the portfolio would _________ .

You are the CFO of Sunland, Inc., a retailer of the exercise machine Slimbody6 and related accessories. Your firm is considering opening up a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 4,800 exercise machines, and the price of each machine is $2,500. The annual sales of accessories will be $600,000, and the operating expenses of running the store, including labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $29,300,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $1,000,000 in additional working capital immediately, and recover it at the end of the investment. Your firm’s marginal tax rate is 30 percent. The opportunity cost of opening up the store is 11.80 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years 1–19 and 20? (Do not round intermediate calculations. Round NPV answer to 2 decimal places, e.g. 5,265.25 and all other answers to the nearest dollar, e.g. 5,265.)

Should you approve it?

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $90,000, and it would cost another $18,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $27,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $12,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $62,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 35%.

1. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest cent.
   $  
2. 
   
3. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest cent.
   Year 1: $  
   Year 2: $  
   Year 3: $  
4. 
   
5. If the WACC is 14%, should the spectrometer be purchased?
   -Select-(Yes, No)

You hope to retire in 30 years, when you do, you would like to have the purchasing power of $100,000 today, during each year of retirement. Your cash is needed at the beginning of each year of retirement. Inflation is expected to be 3% per year from now until the end of your retirement. Your retirement will last 25 years, you expect your 401k to earn 5% per year during your retirement years. How much money do you need at the beginning of your retirement years, to “just meet” your retirement needs (i.e. what is the size of the needed nest egg)?

Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $21,000, which will generate cash flows of $10,000 at the end of each of the next 6 years. Alternatively, the company can spend $12,000 for equipment that can be used for 3 years and will generate cash flows of $10,000 at the end of each year (System B). If the company’s WACC is 10% and both “projects” can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediate calculations. Round your answer to the nearest cent.

Choose Project -Select-(A, B), whose EAA = $  

A swap​ is:

A. an agreement between two or more counterparties to exchange sets of cash flows over some future period.

B. a contract that gives the buyer the right to buy the underlying asset at a set price during a set period of time.

C. a contract that gives the seller the right to sell the underlying asset at a set price during a set period of time.

D. an agreement to buy or sell an asset at an agreed price at a future time.

A swap is different from a futures contract​ because:

A. swaps are subject to increased government regulation.

B. swaps are private agreements between counterparties and its terms are flexible.

C. swaps only offer​ shorter-term hedging.

D. swaps offer less privacy.

Why did futures markets originate in agricultural​ markets?

A. The supply of agricultural products depends on the weather and can be subject to wide price fluctuations.

B. The demand for agricultural products depends on the weather and can be subject to wide price fluctuations.

C. Demand for agricultural products is price elastic.

D. All of the above.

Would a farmer buy or sell futures​ contracts? What would a farmer hope to gain by doing​ so?

A farmer would ▼(sell/buy) futures contracts to reduce the risk of agricultural prices ▼(rising/falling).

Would General Mills buy or sell futures contracts in​ wheat? What would General Mills hope to gain by doing​ so?

General Mills would ▼(sell/buy) futures contracts in wheat to reduce the risk of prices ▼(falling/rising).

According to an article in the Wall Street Journal​, options traders were expecting a large move in the price of Facebook stock. They were buying both call options and put options with strike prices near the​ stock's current market price. The article described this strategy as a bet on the size of the​ [price] move instead of its direction.

​Source: Saumya​ Vaishampayan, Options Traders Betting on Big Move for Facebook ​Shares, Wall Street Journal​, April​ 27, 2016.

If the future price of Facebook stock increased above the current market​ price, traders would exercise the ▼(put options/call options)​, ▼(selling/buying) Facebook stock for ▼(less/more) than the then market price. If the price of Facebook stock decreased from the current market​ price, traders would exercise the ▼(call options/put options)​,▼(selling/buying) Facebook stock for ▼(more/less) than the then market price. Traders would make money using this strategy if the ▼(price of the unexercised options/ spread between the future and current market prices) was less than the ▼(spread between the future and current market prices/price of the unexercised options).

What is the difference between hedging and​ speculating?

▼(Speculating/Hedging) serves to reduce risk in financial​ markets, while ▼(speculating/hedging)

may increase risk in the market.

​[Related to the Making the ConnectionLOADING...​] In one of his annual letters to shareholders of Berkshire​ Hathaway, Warren Buffett wrote that trading derivatives has much more counterparty risk than does trading stocks or bonds because​ "a normal stock trade is completed in a few days with one party getting its​ cash, the other its securities. Counterparty risk therefore quickly​ disappears...."

​Source: Warren​ Buffett, "Chairman's​ Letter," Berkshire Hathaway Inc. 2008 Annual Report​, February​ 27, 2009.

Counterparty risk​ is:

A. the risk that the buyer or seller may be unwilling to fulfill the contract.

B. the risk that one party will sell the contract without notifying the other party.

C. the risk of bargaining.

D. the risk of the other party to the transaction defaulting.  

Counterparty risk is greater for trading in derivatives​ because:

A. the transaction is completed before the underlying asset matures.

B. the transaction is only completed after the underlying asset has matured.

C. some of the more complicated derivatives are traded on exchanges.

D. none of the above.