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:

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      Demand for the                 Probability of this                   Rate of return if this

      Company’s products         demand occurring                   demand occurs                       

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      Weak                                 0.10                                         -50%

      Below Average                 0.20                                         -5%

      Average                             0.40                                         16%

      Above Average                 0.20                                         25%

      Strong                               0.10                                         60%

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      Calculate the stock’s expected return, variance of returns, and standard deviation of returns.

Use the following information for the problem.

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               State of        Probability of              Returns if State Occurs

               Economy      State of Economy       Stock S          Stock T

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               Boom           0.10                            12%                 4%

               Normal         0.65                          9%                   6%

               Recession     0.25                          2%                   9%

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      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.)

1. Some events rarely happen but when they do insurance company must respond appropriately. They fall in a high severity and low frequency category but there are effective means of risk transfer and financing.

Explain the risk transfer options, how insurers respond and the effect on the company operations.                                                                                           [25 marks]

1. The insurance product is unique in that its quality can only be judged when something goes wrong. The way in which a claim is handled will have important marketing repercussions for insurers. That is the reason why, the claims operation must be adequately managed. The procedure for handling claims vary whether it is a personal or commercial claim.             

Review the typical procedures considered when handling claims.         [25 marks]

1. The product offers life protection, savings and even has investment component. Even though it runs for a specified period, life assurance companies are flexible to extend cover so that they make sure that money became available to the policyholders dependents on their death.

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

1. There are different methods to establish a benefit fund accessible to an individual when they are not economically active; who is eligible to use them, advantages and disadvantages of each method vary. Sometimes companies help in setting up these funds as a condition of service.

Which ones would you recommend to an individual or company?         [25 marks]

1. Life assurance companies offer contracts from time to time which guarantee income to the policyholder. The attraction of these products and the rate offered at any time             vary too. There are useful vehicles for investment of lump sum.

Review the various options available in the marketplace.                  

1. A quality service should provide at least meet the quality that the customer expects. An insurance company may aim to respond to a claim advice within a specified timeframe in line, this is known as 'threshold quality' and is fundamental to any quality programme. Without knowledge of these customer expectations, a company may waste resources. To maintain a competitive edge in an increasingly complex environment, insurers must know what customers expect and provide services and products that meet or exceed those expectations.

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.