Walmart Industry Analysis: Conditions, climate, and competition of Walmart's industry and segment.
Consider stocks of two companies A and B, the table below gives their expected returns and standard deviation Expected return for Stock A 10% Expected return for Stock B 25% Standard deviation for Stock A 12% Standard deviation for Stock B 30% Plot the risk and expected return of portfolio of these two stocks for the following correlation coefficient : -1.0,-0.5,0.0,0.5,1.0
1) Best Darn Glasses (BDR) is thinking of investing in a sandblasting machine for its glassware. It provides you with the following information: The initial investment for this project would be $235,000 in specialized machinery. According to CRA, this machine falls into a CCA class of 8%. There is the possibility of salvage of $6,000, although it’s not for sure. The risk-adjusted cost of capital is 12% and the company’s tax rate is 25%. Calculate the CCA tax shield under both scenarios – with and without salvage.
2) Using the information from above, calculate the project’s NPV if the following information were also provided to you: Cost of maintenance of the sandblasting machine is $35,000 per year, and the machine will only last 10 years. The salvage value, at that point, will be zero. The company’s revenues will be $170,000 per year with direct production costs of $27,000.
A stock has the following probability distribution:
Demand for the Probability of this Rate of return if this
Company’s products demand occurring demand occurs
Weak 0.10 -50%
Below Average 0.20 -5%
Average 0.40 16%
Above Average 0.20 25%
Strong 0.10 60%
Calculate the stock’s expected return, variance of returns, and standard deviation of returns.
Use the following information for the problem.
State of Probability of Returns if State Occurs
Economy State of Economy Stock S Stock T
Boom 0.10 12% 4%
Normal 0.65 9% 6%
Recession 0.25 2% 9%
a) Find the expected return of each stock.
Use at least seven decimal places in computations of (b), (c) and (d) below to avoid significant rounding errors.
b) Calculate the variance and standard deviation of returns of each stock.
c) Compute the covariance and correlation of returns between the two stocks.
d) Assume that you invest $4,500 in Stock S and $3,000 in Stock T. Find the expected return on the portfolio and the standard deviation of the portfolio’s return.
You will receive $7,600 three years from now. The discount rate is 13 percent. a. What is the value of your investment two years from now? Multiply $7,600 × .885 (one year’s discount rate at 13 percent). (Round your answer to 2 decimal places.) b. What is the value of your investment one year from now? Multiply your rounded answer to part a by .885 (one year’s discount rate at 13 percent). (Round your answer to 2 decimal places.) c. What is the value of your investment today? Multiply your rounded answer to part b by .885 (one year’s discount rate at 13 percent). (Round your answer to 2 decimal places.)
Explain the risk transfer options, how insurers respond and the effect on the company operations. [25 marks]
Review the typical procedures considered when handling claims. [25 marks]
Identify and describe the variations under this product. [25 marks]
You wish to construct a short butterfly using the following options. Draw the contingency graph and fully label the graph. (You must label the corresponding dollar values for the max gain, max loss, and the spot rates for break-even point(s), and all kinks)
The following are contract characteristics of various options:
A: Put option with a strike price of $0.75 and a premium of $0.04
B: Put option with a strike price of $0.82 and a premium of $0.08
C: Put option with a strike price of $0.89 and a premium of $0.15
Which ones would you recommend to an individual or company? [25 marks]
Review the various options available in the marketplace.
How do insurance companies achieve this? [25 marks]
At an output level of 45,000 units, you calculate that the degree of operating leverage is 2.79. Fixed costs are $175,000.
a. What is the operating cash flow at 43,000 units? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
b. What is the degree of operating leverage? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
Matt needs to borrow money to go to college. He has been granted a student loan of $7000. When is school, he actually only needed $6000. He has two options for paying it back. The great news about student loans is that interest does not calculate until he finishes school. What should be choose and why? • Option A: Pay back $1000 extra before the interest starts. Pay back the $6000 loan over 3 years at 5.2% interest compounded annually by making monthly payments. • Option B: Use the extra $1000 to help buy a car. Pay back the entire student loan over 4 years at 5.2% interest compounded annually by making monthly payments.