One popular method of acquiring commercial is through a lease. What are the pros and cons of leasing a commercial property as a means of acquiring ownership and/or a means of controlling the property?

1. Consider the following two banks:

• Bank 1 has assets composed solely of a 8-year, 12 percent coupon, $1 million loan with a 12 percent yield to maturity. It is financed with a 8-year, 10 percent coupon, $900,000 face value CD with a 8 percent yield to maturity.
• Bank 2 has assets composed solely of a 10-year, 12 percent, zero-coupon bond with a maturity value of $2,800,000. It is financed with a 9-year, 8.3 percent coupon, $1,000,000 face value CD with a yield to maturity of 10 percent.

All securities except the zero-coupon bond pay interest annually.

1. What are the durations of the assets and liabilities of each bank?

2. What are the expected changes in net value of each bank based on durations for a 5% decrease in interest rate in assets and 4% decrease in interest rate in liabilities?

In preparation for Thanksgiving, a Finance professor goes to Wegman’s and buys a 20-lb Fresh Young Turkey for $53.80. If the long-term average of US inflation rate is 2% per year, how much did her senior neighbor pay for a 18-lb turkey 20 years ago?

The professor hears that specialized turkey is the mainstream now. She likes the idea of giving up some quantity for better quality since she usually does not like the leftover. She is curious if her budget is the same, how small of a bird she could afford if she buys free-range turkey at $4.49/ lb (please round the number)?

She now wants to compare free-range turkey of that size with organic turkey of the same size, which is selling at $6.24/ lb and calculate how much extra would she have to pay? If that once-per-year extra spending could otherwise be put into a stock trading account that earns 8% per year, compounded quarterly, how much could have otherwise accumulated after 20 Thanksgivings if she does not go for organic turkey?

(This one requires both converting APR to EAR and a saving annuity at EAR).

You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning its operation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 55%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions. Last year's sales = S0 $300.0 Last year's accounts payable $50.0 Sales growth rate = g 40% Last year's notes payable $15.0 Last year's total assets = A0* $500 Last year's accruals $20.0 Last year's profit margin = PM 20.0% Initial payout ratio 10.0%

Analyze why, despite employing various investment appraisal techniques, large investment projects in big corporations may fail to deliver their estimated cash flows. Critically assess how a failed capital project may affect key stakeholders and shareholder value, and also shape the future strategy of investment capital.

Daniel Sawyer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year, and he wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.

Critically analyze the merits and demerits of the Capital Asset Pricing Model (CAPM) and discuss its value in practice.

You are considering investing in Australian shares and decide to investigate the shares of two Australian companies: Woodside Petroleum Ltd (WPL.AX) and Commonwealth Bank of Australia (CBA.AX).

Below are the opening prices, closing prices and dividends paid for WPL Ltd and CBA for the financial year 2018-2019.

Construct the minimum variance portfolio (MVP) comprising of only WPL and CBA and calculate the risk (standard deviation) and return of this minimum variance portfolio. (Hint: To calculate return of MVP you need annual holding period returns of the shares.)

A company’s common stock is expected to pay $2 in dividends annually over the next four years. At the end of the fourth year, its stock is expected to be valued at $45. If the firms cost of equity is 12%, what is its intrinsic value? What should its stock sell for in 1 year?

Please use excel and show work.

Ingram Electric Products is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.

Suppose that Treasury bills offer a return of about 6% and the expected market risk premium is 8.5%. The standard deviation of Treasury-bill returns is zero and the standard deviation of market returns is 20%. Use the formula for portfolio risk to calculate the standard deviation of portfolios with different proportions in Treasury bills and the market. (Note: The covariance of two rates of return must be zero when the standard deviation of one return is zero.) Graph the expected returns and standard deviations.

https://www.chegg.com/homework-help/suppose-treasury-bills-offer-return-6-expected-market-risk-p-chapter-7-problem-22p-solution-9780077356385-exc?hwh_cr=1

Can someone explain from step 3 onwards, as the explanation is too brief.

For step 4, why do we have to add the numbers together (0.06+0.85) . Where is 0.145 coming from?

And isn't this 0.085?

Thanks!