You have been hired as a risk manager for Acorn Savings and Loan. Currently, Acorn's balance sheet is as follows (in millions of dollars):
|
Assets |
Liabilities |
|||
|
Cash reserves |
48.8 |
Checking and savings |
77.7 |
|
|
Auto loans |
96.0 |
Certificates of deposit |
99.7 |
|
|
Mortgages |
152.8 |
Long-term financing |
98.4 |
|
|
Total Assets |
297.6 |
Total liabilities |
275.8 |
|
|
Owner's equity |
21.8 |
|||
|
Total liabilities and equity |
297.6 |
When you analyze the duration of loans, you find that the duration of the auto loans is 1.8 years, while the mortgages have a duration of 7.1
years. Both the cash reserves and the checking and savings accounts have a zero duration. The CDs have a duration of 2.1
years, and the long-term financing has a 9.6-year duration.
a. What is the duration of Acorn's equity?
b. Suppose Acorn experiences a rash of mortgage prepayments, reducing the size of the mortgage portfolio from $ 152.8 million to $ 101.9
million, and increasing cash reserves to $ 99.7 million. What is the duration of Acorn's equity now? If interest rates are currently4 % and were to fall to 3 %
estimate the approximate change in the value of Acorn's equity. (Assume interest rates are APRs based on monthly compounding.)
c. Suppose that after the prepayments in part (b), but before a change in interest rates, Acorn considers managing its risk by selling mortgages and/or buying 10-year Treasury STRIPS (zero coupon bonds). How many should the firm buy or sell to eliminate its current interest rate risk?
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In: Finance
In: Finance
Bonds of RCY Corporation with a face value of $1000 sells for $960, mature in 5 years, and have a 7% coupon rate paid semiannually. Calculate the investor's RCY by assuming the following: - Bond sold to yield at 7% and the end of the 3-year holding period. - Reinvestment rate 6% APR during this holding period. - PS: state what assumption(s) you need to make in calculating this RCY.
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In: Finance
3–14. (Analyzing the cash flow statement) (Related to Checkpoint 3.3) Google, Inc. (GOOG), is one of the most successful internet firms, and it experienced very rapid growth in revenues from 2011 through 2014. The cash flow statements for Google, Inc., spanning the period are as follows:
|
(US$ millions) |
12/31/2014 |
12/31/2013 |
12/31/2012 |
12/31/2011 |
|
Net income |
$ 14,444 |
$ 12,920 |
$ 10,737 |
$ 9,737 |
|
Depreciation |
3,523 |
2,781 |
1,988 |
1,396 |
|
Amortization |
1,456 |
1,158 |
974 |
455 |
|
Deferred taxes |
(104) |
(437) |
(266) |
343 |
|
Noncash items |
2,693 |
2,268 |
2,288 |
2,004 |
|
Changes in working capital |
364 |
(31) |
898 |
630 |
|
Cash flow from operating activities |
$ 22,376 |
$ 18,659 |
$ 16,619 |
$ 14,565 |
|
Capital expenditures |
(10,959) |
(7,358) |
(3,273) |
(3,438) |
|
Other investing cash flow items, total |
(10,096) |
(6,321) |
(9,783) |
(15,603) |
|
Cash flow from investing activities |
(21,055) |
(13,679) |
(13,056) |
(19,041) |
|
Interest and financing cash flow items |
(1,421) |
(300) |
(99) |
81 |
|
Total cash dividends paid |
− |
− |
− |
− |
|
Issuance (retirement) of stock, net |
− |
− |
− |
− |
|
Issuance (retirement) of debt, net |
(18) |
(557) |
1,328 |
726 |
|
Cash flow from financing activities |
(1,439) |
(857) |
1,229 |
807 |
|
Foreign exchange effects |
(433) |
(3) |
3 |
22 |
|
Net Change in Cash |
(551) |
4,120 |
4,795 |
(3,647) |
Answer the following questions using the information found in these statements:
Is Google generating positive cash flow from its operations?
How much did Google invest in new capital expenditures over these four years?
Describe Google’s sources of financing in the financial markets over these four years.
Based solely on the cash flow statements for 2011 through 2014, write a brief narrative that describes the major activities of Google’s management team over these four years.
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3–15. (Analyzing the cash flow statement) The cash flow statements for retailing giant BigBox, Inc., spanning the period 2013–2016 are as follows:
| (US$ millions) | 12/31/2016 | 12/31/2015 | 12/31/2014 | 12/31/2013 |
|---|---|---|---|---|
| Net income | $ 13,000 | $ 12,000 | $ 11,000 | $ 10,000 |
| Depreciation expense | 6,500 | 6,300 | 5,000 | 4,000 |
| Changes in working capital | 1,200 | 2,300 | 2,400 | 1,000 |
| Cash flow from operating activities | $ 20,700 | $ 20,600 | $ 18,400 | $ 15,000 |
| Capital expenditures | $ (16,000) | $ (14,500) | $ (14,000) | $ (12,300) |
| Cash flow from investing activities | $ (16,000) | $ (14,500) | $ (14,000) | $ (12,300) |
| Interest and financing cash flow items | $ (350) | $ (250) | $ (350) | $ 100 |
| Total cash dividends paid | (3,600) | (2,800) | (2,500) | (2,200) |
| Issuance (retirement) of stock | (8,000) | (1,500) | (3,600) | (4,500) |
| Issuance (retirement) of debt | 1,500 | (100) | 4,000 | 4,100 |
| Cash flow from financing activities | $ (10,450) | $ (4,650) | $ (2,450) | $ (2,500) |
| Net change in cash | $ (5,750) | $ 1,450 | $ 1,950 | $ 200 |
Answer the following questions using the information found in these statements:
Does BigBox generate positive cash flow from its operations?
How much did BigBox invest in new capital expenditures over these four years?
Describe BigBox’s sources of financing in the financial markets over these four years.
Based solely on the cash flow statements for 2013 through 2016, write a brief narrative that describes the major activities of BigBox’s management team over these four years.
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In: Finance
Explain how carelessness and ignorance can result in breaches of confidentiality.
What does respecting your employer’s resources mean?
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You are the CFO of a company: What are the important assumptions that underlie your projections? These assumptions may be associated with both external or internal factors.
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The retail sales tax has become a popular way to finance state, county, and city governments as well as special districts. What are the pros and cons of reliance on the retail sales tax as a primary source of revenue, especially for local governments?
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What is the present value of an annuity that pays $8,500 per year for 13 years with a 8% interest rate with the first payment TODAY.
Please show how to calculate in excel!
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| Bethesda Mining Company reports the following balance sheet information for 2018 and 2019. |
| BETHESDA MINING COMPANY Balance Sheets as of December 31, 2018 and 2019 |
|||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||
| Assets | Liabilities and Owners’ Equity | ||||||||||||
| Current assets | Current liabilities | ||||||||||||
| Cash | $ | 31,982 | $ | 41,399 | Accounts payable | $ | 193,422 | $ | 201,111 | ||||
| Accounts receivable | 58,781 | 79,139 | Notes payable | 88,520 | 140,088 | ||||||||
| Inventory | 131,971 | 198,632 | |||||||||||
| Total | $ | 281,942 | $ | 341,199 | |||||||||
| Total | $ | 222,734 | $ | 319,170 | |||||||||
| Long-term debt | $ | 244,000 | $ | 180,750 | |||||||||
| Owners’ equity | |||||||||||||
| Common stock and paid-in surplus | $ | 211,000 | $ | 211,000 | |||||||||
| Accumulated retained earnings | 143,239 | 175,549 | |||||||||||
| Fixed assets | |||||||||||||
| Net plant and equipment | $ | 657,447 | $ | 589,328 | Total | $ | 354,239 | $ | 386,549 | ||||
| Total assets | $ | 880,181 | $ | 908,498 | Total liabilities and owners’ equity | $ | 880,181 | $ | 908,498 | ||||
| Calculate the following financial ratios for each year: | |
| a. | Current ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| b. | Quick ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| c. | Cash ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| d. | Debt-equity ratio and equity multiplier. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| e. | Total debt ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
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| High Flyer, Inc., wishes to maintain a growth rate of 14.5 percent per year and a debt-equity ratio of .6. The profit margin is 4.4 percent, and total asset turnover is constant at 1.14. | |
| a. | What is the dividend payout ratio? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What is the maximum sustainable growth rate for this company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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A family takes out a mortgage for $277,400.00 from the local bank. The loan is for 30 years of monthly payments at a 4.32% APR (monthly compounding). What will the family’s balance be on the mortgage after 6.00 years?
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