Why is it that showing a “profit” doesn’t always indicate that all is well with an enterprise?What other factors are critical for an enterprise’s success over the long term?
In: Finance
The current price of a stock is $32, and the annual risk-free rate is 5%. A call option with a strike price of $29 and with 1 year until expiration has a current value of $6.40. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent.
In: Finance
Black-Scholes Model
Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $37, (3) time to expiration is 2 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.36. Do not round intermediate calculations. Round your answer to the nearest cent.
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Briefly compare the Exist Multiple Method vs. the Perpetuity Growth Method.
What is the weakness of both methods?
Would you use one of these methods for a "quick" analysis of the target's value?
In: Finance
would you please show the work
Assuming a normal distribution for the returns on investment, if the mean return is 12% and the standard deviation of returns is 6%, what is the probability of earning 0% or less?
The returns on two stock have a correlation of 0.50. One stock’s returns have a variance of 100%2 while the other has a variance of 81%2 . What is the covariance between the stocks’ returns?
A portfolio is comprised of $400 invested in stock A, which has an expected return of 10%, and $300 invested in stock B, which has an expected return of 15%. What is the expected return on the portfolio?
A portfolio is construct of 40% in the market portfolio and 60% in the risk-free asset. If the return on the Market portfolio is 10%, the return on the risk-free asset is 3%, and the standard deviation of the market portfolio’s returns is 20%. What are the return and standard deviation of returns of the portfolio?
In: Finance
What is the difference between the reported Vol of 770 and Int of 39884 for the AAPL 210 CALL option? Make sure to explain Vol and Int.
In: Finance
Entrepreneurs' stories usually tell us about challenges faced and overcome. What is fascinating if you hear enough stories is that there are some strategies that are used again and again. Knowing these strategies can help you achieve your own entrepreneurial dreams. What are these strategies?
In: Finance
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Comprehensive Ratio Analysis The Jimenez Corporation's forecasted 2020 financial statements follow, along with some industry average ratios. Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2020
Calculate Jimenez's 2020 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Do not round intermediate calculation. Round your answers to two decimal places.
So, the firm appears to be -Select-badlywellItem 27 managed. |
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In: Finance
Using the Du Pont method, evaluate the effects of the following
relationships for the Butters Corporation.
a. Butters Corporation has a profit margin of 6
percent and its return on assets (investment) is 22.25 percent.
What is its assets turnover? (Round your answer to 2
decimal places.)
b. If the Butters Corporation has a
debt-to-total-assets ratio of 40.00 percent, what would the firm’s
return on equity be? (Input your answer as a percent
rounded to 2 decimal places.)
c. What would happen to return on equity if the
debt-to-total-assets ratio decreased to 25.00 percent?
(Input your answer as a percent rounded to 2 decimal
places.)
The balance sheet for Stud Clothiers is shown next. Sales for
the year were $3,200,000, with 75 percent of sales sold on
credit.
|
STUD CLOTHIERS |
|||||
|
Assets |
Liabilities and Equity |
||||
|
Cash |
$ |
25,000 |
Accounts payable |
$ |
247,000 |
|
Accounts receivable |
351,000 |
Accrued taxes |
97,000 |
||
|
Inventory |
251,000 |
Bonds payable (long-term) |
136,000 |
||
|
Plant and equipment |
423,000 |
Common stock |
100,000 |
||
|
Paid-in capital |
150,000 |
||||
|
Retained earnings |
320,000 |
||||
|
Total assets |
$ |
1,050,000 |
Total liabilities and equity |
$ |
1,050,000 |
Compute the following ratios: (Use a 360-day year. Do not
round intermediate calculations. Round your answers to 2 decimal
places. Input your debt-to-total assets answer as a percent rounded
to 2 decimal places.)
In: Finance
Frantic Fast Foods had earnings after taxes of $1,190,000 in
20X1 with 399,000 shares outstanding. On January 1, 20X2, the firm
issued 27,000 new shares. Because of the proceeds from these new
shares and other operating improvements, earnings after taxes
increased by 24 percent.
a. Compute earnings per share for the year 20X1.
(Round your answer to 2 decimal places.)
b. Compute earnings per share for the year 20X2.
(Round your answer to 2 decimal places.)
Prepare an income statement for Franklin Kite Co. Take your
calculations all the way to computing earnings per share.
(Round EPS answer to 2 decimal places.)
|
Sales |
$ |
1,630,000 |
|
Shares outstanding |
171,000 |
|
|
Cost of goods sold |
630,000 |
|
|
Interest expense |
21,000 |
|
|
Selling and administrative expense |
45,000 |
|
|
Depreciation expense |
34,000 |
|
|
Preferred stock dividends |
82,000 |
|
|
Taxes |
110,000 |
|
Elite Trailer Parks has an operating profit of $285,000. Interest
expense for the year was $30,500; preferred dividends paid were
$28,900; and common dividends paid were $36,800. The tax was
$68,500. The firm has 21,600 shares of common stock
outstanding.
a. Calculate the earnings per share and the common
dividends per share for Elite Trailer Parks. (Round your
answers to 2 decimal places.)
b. What was the increase in retained earnings for
the year?
Quantum Technology had $726,000 of retained earnings on December
31, 20X2. The company paid common dividends of $32,600 in 20X2 and
had retained earnings of $503,000 on December 31, 20X1.
a. How much did Quantum Technology earn during
20X2?
b. What would earnings per share be if 46,400
shares of common stock were outstanding? (Round your answer
to 2 decimal places.)
Botox Facial Care had earnings after taxes of $340,000 in 20X1
with 200,000 shares of stock outstanding. The stock price was
$74.80. In 20X2, earnings after taxes increased to $378,000 with
the same 200,000 shares outstanding. The stock price was
$83.00.
a. Compute earnings per share and the P/E ratio
for 20X1. (The P/E ratio equals the stock price divided by earnings
per share.) (Do not round intermediate calculations. Round
your final answers to 2 decimal places.)
b. Compute earnings per share and the P/E ratio
for 20X2. (Do not round intermediate calculations. Round
your final answers to 2 decimal places.)
c. Why did the P/E ratio change? (Do not
round intemediate calculations. Input your answers as percents
rounded to 2 decimal places.)
Stilley Corporation had earnings after taxes of $590,000 in 20X2
with 250,000 shares outstanding. The stock price was $46.10. In
20X3, earnings after taxes declined to $265,000 with the same
250,000 shares outstanding. The stock price declined to
$32.30.
a. Compute earnings per share and the P/E ratio
for 20X2. (Do not round intermediate calculations. Round
your final answers to 2 decimal places.)
b. Compute earnings per share and the P/E ratio
for 20X3. (Do not round intermediate calculations. Round
your final answers to 2 decimal places.)
The Rogers Corporation has a gross profit of $724,000 and
$283,000 in depreciation expense. The Evans Corporation also has
$724,000 in gross profit, with $48,400 in depreciation expense.
Selling and administrative expense is $243,000 for each
company.
a. Given that the tax rate is 40 percent, compute
the cash flow for both companies.
b. Calculate the difference in cash flow between
the two firms.
In: Finance
Question text
Interpreting the
Accounts Receivable Footnote
Hewlett-Packard Company reports the following in its 2015 10-K
report.
|
October 31 (in millions) |
2015 |
2014 |
|---|---|---|
| Accounts receivable | $13,363 | $13,832 |
Footnotes to the company's 10-K provide the following additional
information relating to its allowance for doubtful accounts.
|
For the fiscal years ended October 31 (in millions) |
2015 |
2014 |
2013 |
|---|---|---|---|
| Allowance for doubtful accounts-accounts receivable | |||
| Balance, beginning of period | $232 | $332 | $464 |
| Provision for doubtful accounts | 46 | 25 | 23 |
| Deductions, net of recoveries | (89) | (125) | (155) |
| Balance, end of period | $189 | $232 | $332 |
(a) What is the gross amount of accounts receivables for
Hewlett-Packard in fiscal 2015 and 2014?
| ($ millions) | 2015 | 2014 |
|---|---|---|
| Gross accounts receivable | Answer | Answer |
(b)What is the percentage of the allowance for doubtful accounts to
gross accounts receivable for 2015 and 2014? (Round your answers to
two decimal places.)
| ($ millions) | 2015 | 2014 |
|---|---|---|
| Percentage of uncollectible accounts to gross accounts receivable | Answer | Answer |
(c)What amount of bad debts expense did Hewlett-Packard report each
year 2013 through 2015 (ignore increase in allowance from
acquisitions)? What amount was actually written off?
| ($ millions) | 2015 | 2014 | 2013 |
|---|---|---|---|
| Bad debt expense | Answer | Answer | Answer |
| Amounts actually written off | Answer | Answer | Answer |
Which of the following statements describes how bad debts expense
compares with the amounts of its accounts receivable actually
written off?
Generally, HP has overestimated its accruals, which has deflated profit by the over-accrual of bad debts.
Generally, HP has underestimated its accruals, which has inflated profit by the under-accrual of bad debts.
The difference between bad debt expense and write-off during the three years is insignificant so it appears that profit has been fairly stated.
The difference between bad debt expense and write-off during the three years has inflated HPQ's cash flows reported.
(d)Compute Hewlett-Packard's write-offs as a percentage of the
allowance account at the beginning of the year.
(Round your answers to two decimal places)
2015 write-offs as a percentage of beginning of year allowance:
Answer%
2014 write-offs as a percentage of beginning of year allowance:
Answer%
What inferences can we draw as a result of changes in the allowance
for doubtful accounts from 2014 to 2015?
The allowance for uncollectible accounts has increased as a percentage of gross accounts receivable in 2015. We can , therefore, expect write-offs to increase.
HPQ's write-offs as a percentage of the allowance decreased from 2014-2015. By this measure it appears that HPQ is accurately accruing for anticipated credit losses.
The allowance for uncollectible accounts has decreased as a percentage of gross accounts receivable in 2015. This means that HPQ is over-stating its bad debt expense in the current year.
HPQ's write-offs as a percentage of the allowance increase from 2014 to 2015. This may imply that the allowance is too small.
In: Finance
7. Market value ratios
Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market-based ratios, relate to a firm’s observable market value, stock prices, and book values, integrating information from both the market and the firm’s financial statements.
Consider the case of Cold Goose Metal Works Inc.:
Cold Goose Metal Works Inc. just reported earnings after tax (also called net income) of $95,000,000, and a current stock price of $14.75 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 2,800,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,300,000).
If Cold Goose’s forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does the company’s management expect its stock price to be one year from now? (Note: Round intermediate calculations to four decimal places. Round the expected stock price to two decimal places.)
$12.22 per share
$15 per share
$9.17 per share
$15.28 per share
One year later, Cold Goose’s shares are trading at $47.12 per share, and the company reports the value of its total common equity as $20,285,200. Given this information, Cold Goose’s market-to-book (M/B) ratio is . (Note: Do not round intermediate calculations.)
Is it possible for a company to exhibit a negative EPS and thus a negative P/E ratio?
No
Yes
Which of the following statements is true about market value ratios?
High P/E ratios could mean that the company has a great deal of uncertainty in its future earnings.
Low P/E ratios could mean that the company has a great deal of uncertainty in its future earnings.
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In: Finance
Credit card is a convenient medium to conduct transactions. However, according to The Star Online (2018), 47% of Malaysian youths have high credit card debts.
Q1. What are the causes of this phenomenon? What can we do to curb this? Write an essay of about 600-800 words.
• Use 6 paragraphs for your essay.
• Your essay should have an introduction, two (2) reasons Malaysian youths have high credit card debts, two (2) solutions to curb this situation and also a conclusion.
• Give your essay an appropriate title. You do not have to attach an essay outline for this essay.
In: Finance
Barings Bank collapsed about two decades ago as a result of
derivative trading. Identify any other high profile corporate
bankruptcy attributable to derivative trading and.
I.Describe the events that created the problem outlining the
differences and similarities between Barings Bank and your chosen
institution
II.What are the lessons that financial institutions, investors and
regulators can learn from the occurrence of such events.
In: Finance
Question 1: choose the correct answer for the following
a. which of the following securities has last priority of payment
a. warrant b. Lease c.Common stock d. Bond
b. Which of the following is the least likely source of venture capital money?
a. Private equity b. Initial public offering c.Corporate ventures d. Angel money
In: Finance