1. You started your investment with an opening deposit of $1,000.  Your portfolio grew as follows:

1. Calculate the average return and geometric return for eachyear.  
2. What is the arithmetic average of your returns?

What is your long-term geometric average?  (the average at end of year 10

please show me how you calculated using excel

Which costs are relevant to Brad's decision to purchase a new, larger boat? If Brad decides to purchase a larger boat, what costs will be affected by this decision? Will they increase or decrease? Identify any unavoidable costs associated with the operation of Fishing Unlimited. Calculate the revenue generated by a 6-hour trip with the old boat (6 guests) and the new boat (8 guests) and compare the two figures. Identify the costs that changed. What conclusion can you draw based on your analysis? Brad Winston is the owner and operator of Fishing Unlimited, a charter fishing business operated out of Oregon Inlet, NC. Brad has been taking groups of guests offshore to fish for tuna and marlin for over 15 years. He purchased his current fishing boat when he started the business but now believes that a larger and better-outfitted vessel would allow him to increase the rate he charges per charter. Currently, he can carry a maximum of 6 guests while the larger boat will carry up to 8. The larger boat would also require him to take 2 deckhands on each outing, providing better service to his customers. Cost data for Brad's business is shown in the table below.

Fishing Unlimited Annual straight-line depreciation on boat$ 8,300

($175,000 original cost - $90,000 estimated resale value/20 years)

Fuel Cost (per hour)$ 50 Insurance Premium (annual)$ 1,900

Maintenance and Repairs (annual)$ 3,500

Fishing Tackle and Gear (original cost)$ 7,000

Tackle and Bait (per guest)$ 20

Deck Hand wages (per hour)$ 20

Dock Fees (annual)$ 2,400

Captain's License (annual)$ 200

Food and Beverages (per guest)$ 25

Professional Fees (per year)$ 750

Dock Utilities (annual)$ 1,200 

Brad has someone interested in purchasing his existing boat for $80,000. He could use this cash as a deposit on the new boat which will cost him $225,000. His banker estimates the payments on the new boat will be about $1,500. The new boat is more fuel efficient and he believes he can cut his fuel costs by 10% but the more expensive boat will increase his insurance premium by 12%. He is also concerned that he will have to change to a larger boat slip which would increase his dock fees by 5%. The good thing about the new boat is that he should save on maintenance and repairs, at least for the first 3 years. The only other expense Brad would incur with the new boat is adding some additional fishing tackle and gear to accommodate larger parties that he estimates would cost him about $1,500.

His fees for both the old and the new boat are as follows: Old Boat 4 hours$ 550 6 hours$ 650 Full Day (9 hours)$ 1,100 New Boat 4 hours $ 600 6 hours $ 700 Full Day (9 hours) $1,200

Matta manufacturing is trying to decide between two different conveyor belt systems. System A costs $264,000, has a four year-life, and requires $81,000 in pretax annual operating costs. System B costs $372,000, has a six year life, and requires $75,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 34 percent and the discount rate is 8 percent.

A/ Calculate the NPV for both conveyor belt systems

B/ Which conveyor belt system should the firm choose?

annual cash flow,

-500,000
125,000
150,000
175,000
200,000
250,000

What is the Modified IRR (MIRR), with a reinvestment rate equal to the WACC of 8%?

annual cash flow,

-500,000
125,000
150,000
175,000
200,000
250,000

What is the IRR of the investment

A borrower is offered a 30 year, fully amortizing ARM with an initial rate of 3.35%. After the first year, the interest rate will adjust each year, using 1 yr LIBOR as the index, plus a margin of 175bp. The price of the property is $8,000,000 and the loan will have an initial LTV ratio of 75% At the first reset date, 1 year LIBOR is at 3%. What is the borrower s payment during the 2nd year of the loan

A borrower is interested in comparing the monthly payments on two otherwise equivalent 30 year FRMs. Both loans are for $100,000 and have a 3.35% interest rate. Loan 1 is fully amortizing, where as Loan 2 has negative amortization with a $120,000 balloon payment due at the end of the life of the loan. How much higher is the monthly payment on loan 1 versus loan 2? (Hint: calculate both payments and take the difference. Only the future values of the loans are different. Round your answer to two decimal places.)

11: Sue owns 2000 shares of the 20 million outstanding common shares of ABC Corp. ABC stockholders have preemptive rights. Now, ABC decides to sell 2 million new common shares through a rights offering. How many rights will Sue receive?

        a. 200

        b. 0.20

        c. 0.10

        d. 20

18: Suppose we employ a "price-weighted" methodology to construct and track a two-stock index based on Stocks X and Y. Stock X has an initial price of $10 and there are 10 million shares outstanding. Stock Y has an initial price of $20 and there are 40 million shares outstanding. One month later, Stock Xs price is $12 and Stock Ys price is still $20. The shares outstanding remain the same. What is the percentage change in our price-weighted index over the one-month period?

        a. 0

        b. 20.00%

        c. 6.67%

        d. 2.22%

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<6> You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. Draw the CML (capital market line) and your fund’s CAL on an expected return/standard-deviation diagram.

1. What is the slope of the CML?
2. Please characterize in one short paragraph the advantage of your fund over the passive portfolio investing in S&P 500 index.

[NOTE: CML (capital market line) is a special case of the CAL; specifically, the risky portfolio in the CML line is a market portfolio.  (In practice, we often use S&P 500 index as a proxy for the market portfolio.) ]

The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Guthrie Enterprises needs someone to supply it with 159,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost $1,990,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that in five years this equipment can be salvaged for $169,000. Your fixed production costs will be $284,000 per year, and your variable production costs should be $11.30 per carton. You also need an initial investment in net working capital of $149,000. The tax rate is 24 percent and you require a return of 13 percent on your investment. Assume that the price per carton is $17.90.

a. Calculate the project NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. What is the minimum number of cartons per year that can be supplied and still break even? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

c. What is the highest fixed costs that could be incurred and still break even? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Question 2-7 are based on the following series of futures price (F(0), F(1),... F(6)):

Day 0: F(0)=$212

Day 1: F(1)=$211

Day 2: F(2)=$214

Day 3: F(3)=$209

Day 4: F(4)=$210

Day 5: F(5)=$202

Day 6: F(6)=$200

Suppose you are going to long 20 contracts. The initial margin=$10 per contract, and the maintenance margin is $2.

Questions:

How much do you need to deposit in the trading account at Day 0?

Using the same set of information from Question 2, what is the ending balance in Day 1?

Using the same set of information from Question 2, figure out what is the first day, on which, you receive margin call and need to put extra money into the trading account?

Using the same set of information from Question 2, answering what is the additional fund that needs to put into account on Day 6?

Using the same set of information from Question 2, answering what is the ending balance at Day 6?

Using the same set of information from Question 2, answering which day has the largest gain among the 6 days?

A firm is considering developing a Customer Relationship Management (CRM) system in order to better learn their customer’s preferences, and simplifying the ordering process. The firm is considering outsourcing the development to a well-known vendor. The vendor estimates the development cost to be $1 Million, which will be due upfront. The firm expects to generate additional revenues from better targeting of customers to the tune of $250,000 every year for the next ten years. The ongoing licensing and maintenance costs for the initiative is expected to be $25,000 annually. Assuming that the investment will be made in Year 0, and the annual benefits and costs will be incurred at the end of each year,

What is the Payback Period (rounded in years) for the project using discounted cash flows? What is the Return on Investment (again using discounted cash flows) for the project? What would be the Payback Period and the Return on Investment if the additional revenues were $200,000 annually instead of $250,000?

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Read Parts 1 and 2 of the article Morgan Stanley Round table on Capital Structure and Payout Policy and provide a summary of the salient points made by the panelists on the optimal capital structure and the payout policy of the firm