6. How, are the four functions of management, related to the five skills of management? Use examples to clarify your answer.

Medical Research Corporation is expanding its research and production capacity to introduce a new line of products. Current plans call for the expenditure of $100 million on four projects of equal size ($25 million each), but different returns. Project A is in blood clotting proteins and has an expected return of 18 percent. Project B relates to a hepatitis vaccine and carries a potential return of 14 percent. Project C, dealing with a cardiovascular compound, is expected to earn 11.8 percent, and Project D, an investment in orthopedic implants, is expected to show a 10.9 percent return. The firm has $15 million in retained earnings. After a capital structure with $15 million in retained earnings is reached (in which retained earnings represent 60 percent of the financing), all additional equity financing must come in the form of new common stock. Common stock is selling for $25 per share and underwriting costs are estimated at $3 if new shares are issued. Dividends for the next year will be $.90 per share (D1), and earnings and dividends have grown consistently at 11 percent per year. The yield on comparative bonds has been hovering at 11 percent. The investment banker feels that the first $20 million of bonds could be sold to yield 11 percent while additional debt might require a 2 percent premium and be sold to yield 13 percent. The corporate tax rate is 25 percent. Debt represents 40 percent of the capital structure.

a.) Based on the two sources of financing, what is the initial weighted average cost of capital (Use Kd and Ke.)?

b.) At what size capital structure will the firm run out of retained earnings?

c.) What will the marginal cost of capital be immediately after that point?

d.) At what size capital structure will there be a change in the cost of debt?

e.) What will the marginal cost of capital be immediately after that point?

f.) Based on the information about potential returns on investments in the first paragraph and information on marginal cost of capital (in parts a, c, and e), how large a capital investment budget should the firm use?

A stock has had the following year-end prices and dividends:

What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

You are given the returns for the following three stocks:

Calculate the arithmetic return, geometric return, and standard deviation for each stock.

A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used 6 workers, who together produced an average of 90 carts per hour. Workers receive $18 per hour, and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $11 per hour while output increased by 4 carts per hour.

a. Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. (Round your answers to 3 decimal places.)

b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 3 decimal places.)

c. Comment on the changes in productivity according to the two measures. Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places.

Answer the following questions based . Write your response in a separate Microsoft Word document: o Importance of Cost of Capital:

THE ANSWER SHOULD BE BASED ON AMAZON

Why is cost of capital important to an organization, and what does it measure?

o Meaning of Calculations: How do organizations calculate various costs, and what do these calculations mean to business?

Please explain why bond prices are subject to changes in interest rates.

Describe the characteristics of a bond and provide an example of a firm or government entity that has recently issued (sold) these securities.

Need 300 words discussions

Bongo Company's board of trustees knows the company needs to raise some serious cash to finance expansion. They are considering three options to raise the needed cash. They can issue bonds, issue common sock or issue preferred stock. Compare and contrast the advantages and disadvantages of each of these approaches to financing. Which one would you suggest Bongo use to raise the funds and why?

1.You are considering an investment that will pay you $1,200 in one year, $1,400 in two years, and $1,600 in three years, $1,800 in four years, and $11,000 in five years. All payments will be received at the end of the year. • Your opportunity cost of capital (r ) is 10.5%

• Using the present value formula calculate the present value of each of the cash flows by

1. Discounting cash flows using annual compounding

2. Discounting cash flows using monthly compounding

3. Discounting cash flows using continuous compounding • How much would you be willing to pay for the investment using each of the three different compounding scenarios? That is, what is the present value of the cash flows from the investment using each of the three different compounding scenarios? • Which of the three present values is the largest (annual, monthly or continuously compounded returns)? Please explain why this is the case.

2. Tiny’s Quick Loans offers customers a “four for five or I knock on your door” loan. That is, Tiny will lend you $4 today and you repay Tiny $5 in one week when you get paid. What is the effective annual return Tiny is earning in this lending business? What is the APR that you are paying Tiny? (Assume that there are 52 weeks in the year.)

ABC's return on equity (ROE) was very poor last year, but management has come up with a plan to improve things. The new plan calls for a debt ratio of 58 percent, which will generate interest expenses of $327,000 per year. Management projects that the operating profit margin will be 12.7 percent on sales of $13 million. They project a total asset turnover ratio of 1.9 and a tax rate of 40 percent. Given that information, what will be ABC's ROE under the new plan? (show your answer in decimal form to at least 3 decimal places, so if you calculated net income of 1,000 and equity of 3,000 then you would enter 0.333)

You find two investments:

1) a T-BILL with a Face value of 10.000 $ and 120 day until maturity with a current price of 96.5 and

2) 260 days to maturity a price of 92.8 and a Face Value of 10,000 $.

Questions:

Calculate the 4 different money market yields for both instruments.

Which of the two money market instruments will you choose? Justify your decision

Take two of the five functions of insurers and describe and discuss the functions. Rate the five functions in terms of (1) importance, and separately, (2) difficulty. Explain your reasoning.

1. In the B/S model, a decrease in time to expiration will lead to

a. an increase in call value and a decrease in put value

b. a decrease in call value and an increase in put value.

c. an increase in call value and an increase in put value

d. none of the above

2. The Black-Scholes option pricing model allows for continuous movements in the value of the underlying stock.

a. true

b. false

3.

Use the Black-Scholes formula to the value of a call option given the following information:

T= 6 months

standard deviation=25%

Exercise price= 50

Stock price=50

Interest rate= 2%

a. 3.75

b. 2.87

c. 3.11

d. 3.63

4. Use the information in the previous question to find the value of a six month put option on the same stock with an exercise price of 50. Round intermediate steps to four decimals and round your final answer to two decimals. Do not use the dollar sign when entering your response.