Acme Corp has a target debt/equity ratio of 0.35. It was $350 million in bonds outstanding with a yield of 7% and 50 million shares of stock outstanding with a current market price of $20 per share. The company’s beta is 1.32 and the risk-free rate of interest is 4% with a market risk premium of 6%. The firm has a tax rate of 25%. The company is looking to raise $250 million to build a second factory. The new factory will increase output substantially. The table below shows the anticipated cash flows generated from the new factory including a salvage value in year 5. What is the IRR of this project?

Group of answer choices

13.47%

14.21%

15.58%

12.26%

A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after she purchased the bonds, interest rates fell to 5%.

What is the percentage change in the price of each bond after the decline in interest rates? Assume annual coupons and annual compounding. Fill in the following table. Do not round intermediate calculations. Round your answers to two decimal places.

The table contains the Sales estimates for the next year. The Purchases are 64% of Sales. Purchases are paid in the following month. The administrative expenses of $10,196 are paid each month Tax expenses of $39,003 are paid in March, June, September, and December each year. Rent expenses of $79,725 are paid in June and December. What is the cash outflow for March?

Jan- 59,595 Feb- 60,120 Mar- 20,032 Apr-68,137 May- 59,595 Jun- 60,120 Jul- 68,137 Aug-20,032 Sep-59,595 Oct-20,032 Nov-60,120 Dec-68,137     

You estimated a regression model using annual returns of ExxonMobil (as a dependent variable) and of the market (as an independent variable). The R-squared of this regression is 0.2, and the total standard deviation of ExxonMobil's returns in the estimation window is 25%. In this case, the standard deviation of the unsystematic (or idiosyncratic) component of ExxonMobil's returns is:

A 5-year Treasury bond has a 4.7% yield. A 10-year Treasury bond yields 6.15%, and a 10-year corporate bond yields 8.05%. The market expects that inflation will average 2.25% over the next 10 years (IP₁₀ = 2.25%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP = LP = 0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described.

What is the yield on this 5-year corporate bond? Round your answer to two decimal places.

%

You work as a financial consultant for a major national company. One of your clients, Kay, comes in to talk to you about a new idea. She is interested in quitting her management job at a large corporation where she has long hours and a lot of stress. She would like to take a position with a much smaller not-for-profit company, focusing on an issue she has been passionate about for years. Unfortunately, this not-for-profit cannot pay her even half of what she makes now. She has figured out that if she can get rid of her $40,000 in student loans (which she can currently pay monthly but could not if she took the nonprofit job), she could afford to take the job and maintain a decent lifestyle. She has come to you to discuss declaring bankruptcy to get rid of her student loans so she can change jobs. Analyze her ability to do this.

List some enterprise fund listed in your city's CAFR. What are the fees associated with fund? is the funds self supporting?

Which of the following actions do not lead to agency costs and explain why?

I. Foregoing an investment opportunity which would add to the market value of the owners’ equity.

II. Paying a dividend to each of the existing shareholders.

III. Purchasing new equipment which increases the value of each share of stock.

IV. Hiring outside auditors to verify the accuracy of the company financial statements

Which form of business organization(s) can potentially face agency problems and which faces the greatest agency problems? Please consider each of the following business organizations and explain why they may or may not face agency problem.

I. Sole proprietorship

II. Partnership

III. Corporation

If a tax were put on stock market transactions, it would probably substantially reduce trading. What would you expect it to do to volatility of individual stocks and stock indices?

Please link any articles you have used to help you answer this question.

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.2%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 12% 33% Bond fund (B) 5% 26% The correlation between the fund returns is 0.0308. What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Zane just graduated from college and us thrilled to explore his new life and all the excitement that comes with it. Just now, Zane received communication from a company to whom he owes $100,000 in student loans. The information in the communication states that Zane agreed on an annual interest rate of 7.99% that is compounded annually. Also, Zane is allowed to make one fixed payment at the end of each year for the next 10 years.

Zane is shocked by this information because it has been 4 years since he signed that agreement but he is not dishearted because he received another email from a company he interviewed with that he has been hired at an above average starting salary. Zane is a planner and he pulls up his old financial calculator to figure out how he is going to be debt free very soon.

Although the loan asks for payment at the end of each year, Zane believes that he should not wait all year long and instead should save every month. His expected salary after taxes is $5,000 per month. He has a savings account at a credit union that is expected to pay 3% interest on savings that is compounded monthly.

In order to save the annual payment, Zane has decided to deposit an equal amount of money from his paycheck to his savings account. What should be the monthly amount for Zane to have accumulated the annual payment? Show steps on how you got answer.

Discuss 2 of the 4 elements of an Insurable Risk (peril). Choose one of the 4 elements, and describe how, if it is missing, an manager might deal with that risk (peril).

Question 1   

Mel Meyers International Inc. has a series of $1,000 par value bonds outstanding. Each bond pays interest quarterly and carries a coupon rate of 8%. Some bonds are due in 6 years while others are due in 10 years.

Required:

1. If the required rate of return on bonds is 10%, what is the current price of the bonds with 6 years to maturity?
2. If the required rate of return on bonds is 4%, what is the current price of the bonds with 10 years to maturity?
3. Briefly but concisely explain the results of your calculations in part (A) and (B) above.  

Question 2

What options do small businesses have for raising capital? How does small business cost of capital compare to the cost of capital for a large business? Briefly and concisely explain.

Discuss the meaning of Risk Management. Identify and briefly describe the 4 basic techniques available to the risk manager for dealing with pure risks and give an example of each.