Questions
The Lavish Carpet Manufacturing Co. has decided acquire a new machine that has an economic life...

The Lavish Carpet Manufacturing Co. has decided acquire a new machine that has an economic life of 10 years, with no residual value. The machine can be purchased for $75,000, and the supplier is willing to advance $45,000 of the purchase price at 12 percent. The loan is to be repaid in equal instalments over 10 years. Lavish Carpet pays 40 percent corporate income tax and can claim 20 percent capital cost allowances on the purchased asset. It expects to negotiate a further $30,000, 10-year loan with a financial institution at 14 percent interest, thereby financing any purchase entirely through debt. Meanwhile, Midland Leasing Ltd has also offered make the equipment available under a 10 year financial lease. Lease payments of $11,200 are to be paid at the end of each year. How should the asset be acquired?

In: Finance

Find the convexity of a seven-year maturity, 8.6% coupon bond selling at a yield to maturity...

Find the convexity of a seven-year maturity, 8.6% coupon bond selling at a yield to maturity of 9.4%. The bond pays its coupons annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Convexity            

In: Finance

you invest 2500 in your child's college fund at the end of each year for the...

you invest 2500 in your child's college fund at the end of each year for the next 12 years. at that time your kid will withdraw equal amounts at the end of the next four years. what is the annual withdrawal amount if the appropriate interest rate is 8%?

In: Finance

Many companies paid dividends in 20YY and these payouts were attributed to the large cash build-up...

Many companies paid dividends in 20YY and these payouts were attributed to the large cash build-up relative to the market values of many firms. Starbucks was an example of this phenomenon. After two years of poor performance and store closings, in the first quarter of 20YY, Starbucks announced its first dividend payout. They announced not only a 10 cent dividend per share but also announced they would begin to buy back their own shares. Most analysts believe Starbucks has passed the fast-growth stage and are entering a maturity period. What is Starbucks share repurchase and enhanced dividend saying about its future prospects?

In: Finance

You've borrowed $22,000 on margin to buy shares in Disney, which is now selling at $44...

You've borrowed $22,000 on margin to buy shares in Disney, which is now selling at $44 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price falls to $42.50 per share.


a-1.

What is the percentage margin on the above transaction? (Round your answer to 2 decimal places.)


  Percentage margin %


a-2. Will you receive a margin call?
Yes
No

    

b.

How low can the price of Disney shares fall before you receive a margin call? (Round your answer to 2 decimal places.)


  Lowest price $

In: Finance

1) What is a common weakness of Jensen’s alpha and the Treynor ratio? 2) What is...

1) What is a common weakness of Jensen’s alpha and the Treynor ratio?

2) What is one advantage and one disadvantage of the Sharpe ratio?

In: Finance

Suppose you short-sell 100 shares of IBM, now selling at $178 per share. a. What is...

Suppose you short-sell 100 shares of IBM, now selling at $178 per share.


a. What is your maximum possible loss?


  Maximum possible loss are (Click to select)178unlimited0


b.

What happens to the maximum loss if you simultaneously place a stop-buy order at $192.50? (Do not round intermediate calculations. Input the amount as a positive value.)


  Maximum loss $   

In: Finance

Assume that the continuously compounded zeros rates for T=1, 2, 3, 4 (years) are 4.5%, 5.2%,...

Assume that the continuously compounded zeros rates for T=1, 2, 3, 4 (years) are 4.5%, 5.2%,
5.7%, 6.3% respectively. A market maker offers, through forward rate agreements (FRAs), the
following rates; 6.078% for the period between the 1st and the 2nd year, 6.900% for the period
between 2nd and the 3rd year and finally 8.300% for the period between the 3rd and the 4th year.
Evaluate if arbitrage opportunities exist. If such opportunities exist, design a strategy that can
deliver the maximum profit on a principal of £100 million. Assume annual compounding for the
FRA’s interest rate quotes.

In: Finance

Create a scenario in which you attempt to breach the company’s information system in order to...

Create a scenario in which you attempt to breach the company’s information system in order to commit financial fraud. Explain how and why your scheme might work. Identify two internal controls, one preventative control and one detective control, that would quickly prevent or uncover the potential fraud.

In: Finance

Suppose you plan to purchase a $250,000 home. You plan to put 5% down, and take...

Suppose you plan to purchase a $250,000 home. You plan to put 5% down, and take a loan from the bank for the remaining amount. The bank has offered you a 30-year loan with a 4.5% APR (compounded monthly). Calculate the total interest paid to the bank in the 2nd year of the loan. (Round to 2 decimals)

In: Finance

you want to buy a refrigerator for $5300 using a credit card that has interest of...

you want to buy a refrigerator for $5300 using a credit card that has interest of 14.99% APR. How long will it take you to pay off your sofa with regular monthly payments of $200? How much total will you end up paying>

In: Finance

Question 1: Why are banks regulated and protected by government? Question 2: In the past 3...

Question 1: Why are banks regulated and protected by government?

Question 2: In the past 3 years, briefly summarize one major Bank Fraud example?

In: Finance

31. The speed of college tennis player Jaron Jackson’s first serve averages 125 mph, with a...

31. The speed of college tennis player Jaron Jackson’s first serve averages 125 mph, with a standard deviation of 4 mph. If the distribution of service speeds is normal, what proportion of Jaron’s serves will be between 131 and 133 mph?

a. .0035

b. .044

c. .0923

d. .1087

e. .036

In: Finance

Assume $1 is currently equal to $19.33 Mexican peso in the spot market. Assume the expected...

Assume $1 is currently equal to $19.33 Mexican peso in the spot market. Assume the expected inflation rate in Mexico is 5.58 percent while it is 2.80 percent in the U.S. What is the expected exchange rate one year from now if uncovered interest rate parity exists?

In: Finance

A firm’s 2016 balance sheet showed current assets of $1,700 and current liabilities of $800. Its...

A firm’s 2016 balance sheet showed current assets of $1,700 and current liabilities of $800. Its 2017 balance sheet showed current assets of $2,500 and current liabilities of $4,000. What was the firm’s 2017 increase in net working capital?

In: Finance