A fund manager expects to receive a cash inflow of R50,000,000 in three months.
The manager wishes to use futures contracts to take a R30,000,000 synthetic
position in shares and a R20,000,000 in bonds today. The share would have a beta
of 1.05 and the bond a modified duration of 8.25. A share index futures contract
with a beta of 0.80 is priced at R300,000 and a bond futures contract with a
modified duration of 7.50 is priced at R200,000. Calculate the number of share
index futures contracts and bond futures contracts that the manager would have to
trade in order to synthetically take the desired position in the shares and bonds
today. Indicate whether the futures positions are long or short.

Assume​ you've generated the following information about the stock of​ Bufford's Burger​ Barns: The​ company's latest dividends of ​$4.17 a share are expected to grow to ​$4.55 next​ year, to ​$4.96 the year after​ that, and to ​$5.41 in year 3. After​ that, you think dividends will grow at a constant 6​% rate. a. Use the variable growth version of the dividend valuation model and a required return of 15​% to find the value of the stock. b. Suppose you plan to hold the stock for three​ years, selling it immediately after receiving the ​$5.41 dividend. What is the​ stock's expected selling price at that​ time? As in part a​, assume a required return of 15​%. c. Imagine that you buy the stock today paying a price equal to the value that you calculated in part a. You hold the stock for three​ years, receiving dividends as described above. Immediately after receiving the third​ dividend, you sell the stock at the price calculated in part b. Use the IRR approach to calculate the expected return on the stock over three years. Could you have guessed what the answer would be before doing the​ calculation? d. Suppose the​ stock's current

price is actually ​$50.91. Based on your analysis from part a​, is the stock overvalued or​ undervalued? e. A friend of yours agrees with your projections of​ Bufford's future​ dividends, but he believes that in three​ years, just after the company pays the ​$5.41 ​dividend, the stock will be selling in the market for ​$55.10. Given that​ belief, along with the​ stock's current market price from part d​, calculate the return that your friend expects to earn on the stock over the next three years.

I have figured out the risk premium and average risk premium for the question below. I'm having trouble figuring out what the standard deviation of the risk premium is. 2006 18.67 7.50 2007 9.01 7.16 2008 −39.83 2.80 2009 30.90 0.80 2010 20.56 0.92 The average risk premium is 4.03% but can't figure out how to calculate standard deviation of the risk premium.

Yes, an excel function will do.

Thank you.

$100,000 Amortizing Loan

9% Stated Rate

20 Year amortization

Annual payments

-Calculate annual payments

- Prepare amortization table

1) On March 1, 2016 an amount of $2100 was invested in an account which earns 7.5%. Determine the balance on September 1, 2019, if the interest is compounded: a) quarterly AND b) monthly?

2) How much should be invested at 6% compounded semiannually to acquire $2000 in eight years?


3) On July 15th, 2013, $800 was invested in an account paying 10% compounded semiannually. Then on July 15, 2017 the money was reinvested in an account paying 8% compounded daily. Determine the balance on October 20, 2017 using the Banker's Rule.

United Airlines plan to buy 34 airplanes for $120,000,000. Flight operations and ground costs are expected to be $7,000,000 per year and $4,000,000 per year respectively. United expects to sell 300,000 tickets and variable costs are expected to be 20 percent of revenue. With a 14 percent required rate of return, what minimum price per ticket are needed to justify the purchase of the airplanes? (Assume a 20- year life and no salvage value for the airplane at the end of 20 years)(Hint: Income = Rev. - Variable cost-Fixed Cost, find annual revenue).

You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The company has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racket for five years. The equipment required for the project has no salvage value and will be depreciated on a straight-line basis. The required return for projects of this type is 14 percent, and the company has a 35 percent tax rate. Pessimistic Expected Optimistic Market size 122,000 137,000 162,000 Market share 19 % 22 % 24 % Selling price $ 143 $ 148 $ 154 Variable costs per unit $ 97 $ 92 $ 91 Fixed costs per year $ 958,000 $ 913,000 $ 883,000 Initial investment $ 1,555,000 $ 1,470,000 $ 1,385,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit.

BMW Corporation has a bond issue outstanding with an annual coupon rate of 8.2 percent paid quarterly and four years remaining until maturity. The par value of the bond is $1,000. Determine the fair present value of the bond if market conditions justify a 12.5 percent, compounded quarterly, required rate of return. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Fair present value: ??

Why is the goal of wealth maximization is superior than the goal of profit maximization. Also explain why profit maximization is a short run goal and wealth maximization is long run goal.
please explain in detail.

Quantitative Problem: Rosnan Industries' 2018 and 2017 balance sheets and income statements are shown below. Balance Sheets: 2018 2017 Cash and equivalents $80 $65 Accounts receivable 275 300 Inventories 375 350 Total current assets $730 $715 Net plant and equipment 2,000 1,490 Total assets $2,730 $2,205 Accounts payable $150 $85 Accruals 75 50 Notes payable 130 155 Total current liabilities $355 $290 Long-term debt 450 290 Common stock 1,225 1,225 Retained earnings 700 400 Total liabilities and equity $2,730 $2,205 Income Statements: 2018 2017 Sales $2,000 $1,500 Operating costs excluding depreciation 1,250 1,000 EBITDA $750 $500 Depreciation and amortization 100 75 EBIT $650 $425 Interest 62 45 EBT $588 $380 Taxes (40%) 235 152 Net income $353 $228 Dividends paid $53 $48 Addition to retained earnings $300 $180 Shares outstanding 100 100 Price $25.00 $22.50 WACC 10.00% What is the firm’s 2018 current ratio? Round your answer to two decimal places. If the industry average debt-to-total-assets ratio is 30%, then Rosnan’s creditors have a cushion than indicated by the industry average. What is the firm’s 2018 net profit margin? Round your answer to four decimal places. % If the industry average profit margin is 12%, then Rosnan’s lower than average debt-to-total-assets ratio might be one reason for its high profit margin. What is the firm’s 2018 price/earnings ratio? Round your answer to two decimal places. Using the DuPont equation, what is the firm’s 2018 ROE? Round your answer to two decimal places. %

Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $5.4 million. The equipment will be depreciated straight - line over 6 years to a value of zero, but, in fact, it can be sold after 6 years for $606,000. The firm believes that working capital at each date must be maintained at a level of 10% of next year’s forecast sales. The firm estimates production costs equal to $1.70 per trap and believes that the traps can be sold for $7 each. Sales forecasts are given in the following table. The project will come to an end in 6 years, when the trap becomes technologically obsolete. The firm’s tax bracket is 35%, and the required rate of return on the project is 12%. Year: 0 1 2 3 4 5 6 Thereafter Sales (millions of traps) 0 0.5 0.7 0.9 0.9 0.6 0.3 0 Suppose the firm can cut its requirements for working capital in half by using better inventory control systems. By how much will this increase project NPV? (Enter your answer in millions rounded to 4 decimal places.)

Revenues generated by a new fad product are forecast as follows:

Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $42,000 in plant and equipment.

a. What is the initial investment in the product? Remember working capital.

b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 20%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. (Do not round intermediate calculations.)

c. If the opportunity cost of capital is 10%, what is the project's NPV? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What is project IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

A firm wants to finance an investment that would produce an annual EBIT of $415,000 by issuing 850 ten-year zero-coupon bonds (each with $1,000 face value) that will be charged a market interest rate of 8%. Suppose the bonds will be issued on January 1, 2020 and will mature on December 31, 2029.

Assume EBIT is constant over time at $415,000 and the tax rate is 35%. Shown below are income statement templates for the years 2020 and 2029. You do not have to fill these in for credit on the exam, however, feel free to use them as guides for determining how the choice of financing will affect the firm's tax liability for these years. Specifically, determine

a) How much the firm saves in taxes in 2020 and how much the firm saves in taxes in 2029 by having this 10-year bond on its books (relative to the case without any borrowing)? (Don't worry about discounting these tax savings back to the present, just consider the nominal dollar amounts.)

b) How much the firm saves in taxes in 2020 and 2029 in present value terms by having this 10-year bond on its books (again, relative to the case without any borrowing). Assume that January 1, 2020 is the "present," the discount rate is 8%, and the taxes would be paid on December 31 of the statement year.

Income statement for 2020 (Jan 1 - Dec 31, 2020)

Income statement for 2029 (Jan 1 - Dec 31, 2029)