Fiat

Fiat is an Italian car manufacturer based in Italy. The company was founded in 1899, and has grown to become the world's ninth largest car maker, and the largest in Italy. The company is best known for producing small, economical family cars. Fiat designed cars are manufactured worldwide, and the company has factories in Brazil, Poland and Argentina, and has licensing agreements with many other countries, including Russia, India, Pakistan and China. The company has tended to buy out its component suppliers and also minimized the number of suppliers it deals with. This creates greater security of supply and reduces costs, in some cases dramatically.

The Products Although Fiat has a reputation for small, cheap cars, the company has won the prestigious European Car of the Year Award 12 times in 40 years, more often than any other manufacturer. Fiat has also made a major breakthrough in its engine technology, developing an engine (the Fiat 500 model) that has the lowest emissions in the world. In addition, the car is extremely economical to run

Emerging Markets Fiat has made a decision to focus on emerging countries. Since cars sold in these countries need to be simple to maintain and operate, they tend to have fewer features (e.g. often do not have air-conditioning), so Fiat is well-placed to exploit these opportunities. Re-engineering the cars to have fewer features is obviously a great deal cheaper than adding features, so development costs can be minimized.

Promotion on Communications Fiat has concluded an agreement with the British School of Motoring (BSM), which is the UK's largest driving school. BSM uses Fiats for teaching people to drive, and in exchange Fiat provides the cars at a heavily discounted rate, and also offers special deals for graduates of BSM. Fiat's website emphasizes the 'fun' aspects of driving a Fiat. The company believes that Italians have a fun-loving approach to life, and that this is reflected in the design and performance of the cars.

During 2009, the car scrappage scheme adopted throughout Europe (by which governments subsidized the replacement of old cars with new ones in order to stimulate the economy) provided a major boost to Fiat, at a time when the worldwide recession was damaging sales. However, Fiat faces a number of challenges in the next few years. The relative strength of the euro has eroded the firm's competitive price advantage, the rising price of steel worldwide has raised costs, and the entry of
Japanese and Korean manufacturers into Europe has increased competition in Fiat's traditional markets.

The Future As people become more environmentally aware, and as governments worldwide look to bring in legislation to reduce greenhouse gases, Fiat is well placed, with its fuel efficient, cheap-to-run, economical cars. In addition, Fiat's expertise in creating engines that can run on alternative fuels also gives the company an advantage over competitors.

1-Conduct SWOT analysis for Fiat?

2-Discuss the factors Fiat should consider before deciding the price of their cars?

3-Produce 2 objectives for Fiat in 2012?

4- Recommend How Fiat should coordinate its marketing mix in order to maintain its competitive position during an economic recession?

5-Discuss 2 promotional techniques that Fiat can use to promote its cars?

Apply the PESTEL framework for Africa the continent?

On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows:

₁R₁ = 2.23%, ₁R₂ = 2.55%, ₁R₃ = 2.79%, ₁R₄ = 2.90%

Using the unbiased expectations theory, calculate the one-year forward rates on zero-coupon Treasury bonds for years two, three, and four as of March 11, 20XX. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Calculate the tax bill on $75,000 in taxable income:

A $12,439.50

B $14,089.50

C $16,800.00

D $17,600.00

How much would you bring home after taxes on the next $10,000 (above $75,000) in taxable income?

A $7,650

B $7,700

C $7,750

D $7,800

How would Net Working Capital (NWC) be affected if Accounts Payable decreased?

A Decrease in NWC

B Increase in NWC

C No Change

(Try to work this question WITHOUT using Excel, get answer by using the formula and show the calculations in detail)

Question (Retirement planning)

You have just graduated Hofstra University at age 22. You hard work has paid off as you already have a job as an investment banker at Goldman Sachs waiting for you. You plan to work continuously until age 65 and retire exactly on that day. You expect to live until exactly 90 and enjoy your golden years and leave you heirs NOTHING. Assume your investments earn 8% per year.

You plan to contribute $10,000 to your retirement fund every year on your birthday starting at age 23. Your last deposit will be at exactly age 65 and your first withdrawal will be at age 66. Your last withdrawal will be at the moment you die at age 90.

Ignore all tax considerations for this problem. Consider the effect of inflation. Assume inflation averages 4% per year.
(i) How much you will be able to spend each year in retirement?

FV (deposits) = PV (withdrawals)
NOTE: This could be at any time period but t=65 is particularly convenient

(ii) How much will you be able to spend each year in retirement if you begin deposits at age 30?

(iii) How much larger do your deposits have to be if deposits start at age 30 to equal your answer in part (i)?

Consider that you are 35 years old and have just changed to a new job. You have $146,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $6,800 each year into your new employer’s plan. If the rolled-over money and the new contributions both earn a return of 6 percent, how much should you expect to have when you retire in 30 years?

Sig, Inc., wishes to maintain a growth rate of 12 percent per year and a debt-equity ratio of .6. The profit margin is 4.9 percent, and the ratio of total assets to sales is constant at 1.66. What dividend payout ratio is necessary to achieve this growth rate under these constraints? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.) Is this growth rate possible? Yes No What is the maximum sustainable growth rate possible given these constraints? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions.

Consider the case of Blue Hamster Manufacturing Inc.:

Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Lambda is 11.3%, but he can’t recall how much Blue Hamster originally invested in the project nor the project’s net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Lambda. They are:

The CFO has asked you to compute Project Lambda’s initial investment using the information currently available to you. He has offered the following suggestions and observations:

Given the data and hints, Project Lambda’s initial investment is   , and its NPV is   (rounded to the nearest whole dollar).

A project’s IRR will   if the project’s cash inflows decrease, and everything else is unaffected.

After graduating from UTD at age 25, John got his first job at Goldman Sachs with an annual salary of $60,000 a
year and a one-time signing bonus of $25,000. He bought a car using his signing bonus. Goldman Sachs offers a
401K retirement investment plan that will match employee’s contribution up to 10%. For example if John invests
1% in the 401K account, Goldman Sachs will put in another 1% into his account. John is expecting an annual
salary increase of 2.4% (APR on a monthly base. For simplicity, assume that the growth will start in the second
month). Suppose, the 401K investment plan will earn him an annual return of 8.4% (APR on a monthly base).
(Assume the beginning of age 25 is month 0 and salary is paid at the end of each month, i.e., beginning of age 65 is
the last period)
(a) What percentage of salary should John invest in his 401K account in order for him to have $2 million in the
account when he retires in 40 years?
(b) At the same contribution rate, if he retires in 35 years instead, how many percent less money will John have?
(c) Instead of buying a nice car, he brought a used car for $10,000, and saved the rest of signing bonus in a separate
investment account for retirement that pays 9.6% annual interest (APR on a monthly base). If John wants to
have $2 million when he retires in 35 years, what percentage of salary should John invest in his 401K account?After graduating from UTD at age 25, John got his first job at Goldman Sachs with an annual salary of $60,000 a
year and a one-time signing bonus of $25,000. He bought a car using his signing bonus. Goldman Sachs offers a
401K retirement investment plan that will match employee’s contribution up to 10%. For example if John invests
1% in the 401K account, Goldman Sachs will put in another 1% into his account. John is expecting an annual
salary increase of 2.4% (APR on a monthly base. For simplicity, assume that the growth will start in the second
month). Suppose, the 401K investment plan will earn him an annual return of 8.4% (APR on a monthly base).
(Assume the beginning of age 25 is month 0 and salary is paid at the end of each month, i.e., beginning of age 65 is
the last period)
(a) What percentage of salary should John invest in his 401K account in order for him to have $2 million in the
account when he retires in 40 years?
(b) At the same contribution rate, if he retires in 35 years instead, how many percent less money will John have?
(c) Instead of buying a nice car, he brought a used car for $10,000, and saved the rest of signing bonus in a separate
investment account for retirement that pays 9.6% annual interest (APR on a monthly base). If John wants to
have $2 million when he retires in 35 years, what percentage of salary should John invest in his 401K account?

YIELD TO MATURITY

A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 4 years at $1,144, and currently sell at a price of $1,265.82.

1. What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   
   %
   
2. What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   
   %
   
3. What return should investors expect to earn on these bonds?
   
   1. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.
   2. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.
   3. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
   4. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.
   5. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC.

3. Assume that the liquidity of corporate bonds improves a little bit, relative to US Treasury bonds. Given this, we would expect that the yield on US Treasury bonds will _____ and the yield on corporate bonds will _____.

Group of answer choices

rise; rise

rise; fall

fall; rise

fall; fall

4. Analysts predict that short-term interest rates over the next 4 years will be as follows: 5%, 8.5%, 12%, and 1%, respectively. According to expectations theory, the yield on a discount bond with a three year maturity will be ____ and yield on bond with a four year maturity will be ____.

Group of answer choices

8.2%; 7.4%

8.2%; 6.6%

8.5%; 7.4%

8.5%; 6.6%

5. An investor has $100 to invest and she invests in short-term, one year discount bonds over the next 3 years. The forecast for one-year interest rates over the next 3 years is 4.5%, 7.5% and 10.5%. What is the future value of her investment, three years from today?

Group of answer choices

$124.13

$133.35

$137.50

$139.55

Suppose that a company's equity is currently selling for $24.75 per share and that there are 3.3 million shares outstanding and 13 thousand bonds outstanding, which are selling at 94 percent of par. If the firm was considering an active change to their capital structure so that the firm would have a D/E of 0.6, which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell? (Round your intermediate ratio to 4 decimal places.)

• $20,051,213 in new equity

• $23,035,265 in new debt

• $23,035,265 in new equity

• $20,051,213 in new debt

BOND VALUATION

1.) An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 6% annual coupon. Bond L matures in 20 years, while Bond S matures in 1 year.

Assume that only one more interest payment is to be made on Bond S at its maturity and that 20 more payments are to be made on Bond L.

1. What will the value of the Bond L be if the going interest rate is 4%? Round your answer to the nearest cent.
   $
   
   What will the value of the Bond S be if the going interest rate is 4%? Round your answer to the nearest cent.
   $
   
   What will the value of the Bond L be if the going interest rate is 9%? Round your answer to the nearest cent.
   $
   
   What will the value of the Bond S be if the going interest rate is 9%? Round your answer to the nearest cent.
   $
   
   What will the value of the Bond L be if the going interest rate is 11%? Round your answer to the nearest cent.
   $
   
   What will the value of the Bond S be if the going interest rate is 11%? Round your answer to the nearest cent.
   $
   
2. Why does the longer-term bond’s price vary more than the price of the shorter-term bond when interest rates change?
   
   1. Long-term bonds have greater interest rate risk than do short-term bonds.
   2. The change in price due to a change in the required rate of return decreases as a bond's maturity increases.
   3. Long-term bonds have lower interest rate risk than do short-term bonds.
   4. Long-term bonds have lower reinvestment rate risk than do short-term bonds.
   5. The change in price due to a change in the required rate of return increases as a bond's maturity decreases.