Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$30,000 1 12,200 2 14,900 3 16,800 4 13,900 5 –10,400

The company uses an interest rate of 8 percent on all of its projects.

Calculate the MIRR of the project using all three methods. a. MIRR using the discounting approach.

b. MIRR using the reinvestment approach.

c. MIRR using the combination approach.

Challenge question

I.Michael is shopping for a special automobile. He finds the exact car he​ wants, a 1966 dark blue Pontiac GTO. This car is currently the property of a​ neighbor, so to buy it for the​ agreed-upon price of 45,000​, Michael must secure his own financing. He visits four different financial institutions and gets the following available​ loans:

Bank​ 1: 3636 monthly payments of $1,399.78

Bank​ 2: 6060 monthly payments of $891.05

Bank​ 3: 312312 weekly payments of $177.97 ​(Assume a​ 52-week year.)

Bank​ 4: 1616 quarterly payments of $3,297.87

Which loan should Michael​ take?  ​Hint:  Which loan has the lowest​ EAR?

If Michael selects Bank 1 for the​ loan, what is the periodic interest rate on the​ loan?

. 6250​%

If Michael selects Bank 1 for the​ loan, what is the EAR on the​ loan?

  ​(Round to two decimal​ places.)

1. Citing the Digital Millennium Copyright Act (DMCA), Airbnb is challenging the New York law and others in the United States, arguing that it merely operates a digital marketplace, and thus is not responsible for the content that users place on its site. Do you think Airbnb has a strong argument? Why or why not?

2. Are you concerned that the concept of the sharing economy could be abused by unscrupulous “entrepreneurs” and thus give the entire novel concept a bad reputation? Why or why not? Explain.

“The most appropriate financing pattern would be one in which asset buildup and length of financing terms is perfectly matched.” Discuss the difficulty involved in achieving this financing pattern.  

Below are numbers from a balance sheet and income statement. Based on these numbers calculate the financial ratios requested below.

All answers must be rounded to TWO decimal places including percentages

421756

313053

10000

5000

29408

1000

30000

52175

50000

11000

10000

50000

62175

0. Based on these values calculate:

   1. Current ratio

   2. Quick ratio

   3. NWC-to-total-Assets (Working capital to assets)

   4. Ratio of total debt and liabilities to total assets

   5. Ratio of total debt and liabilities to shareholder’s equity

   6. Interest coverage

   7. Net profit margin

   8. Sales to total assets (Asset turnover)

   9. Return on assets

   10. Equity multiplier

   11. Return on equity

Problem 9-13

Two firms have sales of $1.5 million each. Other financial information is as follows:

What are the operating profit margins and the net profit margins for these two firms? Round your answers to two decimal places.

Operating profit margins:

Firm A: %

Firm B: %

Net profit margins:

Firm A: %

Firm B: %

What are their returns on assets and on equity? Round your answers to two decimal places.

Return on assets:

Firm A: %

Firm B: %

Return on equity:

Firm A: %

Firm B: %

Discounted Cash Flow Models discussed:

1. The Adjusted Present Value Model
2. The Free Cash Flow to Equity Model

What are the advantages and shortcomings of each?

Which one do you think is generally better to use? Why?

In case of an asymmetric demand shock, which "tool" cannot be used ANYMORE by countries that have joined a monetary union?

16. Consider the following information about the CMX gold futures contract:

    (a) Contract size: 100 troy ounce
    Initial margin: $1,013 per contract
    Maintenance margin: $750 per contract
    Minimum tick size: 10 cents/troy ounce ($10/contract)

    There are four traders, A, B, C, and D in the market when next yearís June contract commences trading. (Kolb Ch3)

(a) Complete the following table showing the open interest for the contract.

(b) Calculate the gains and losses for Trader A. Assume that at the time of each change in position, Trader A must bring the margin back to the initial margin account. Compute the amount in Trader Aís margin account at the end of each trading day. Will Trader A get a margin call? If so, when and how much additional margin must be posted?

4. Consider two countries: Japan and France. Suppose you saw the following information in the newspaper: Interest rate on one-year Japanese deposits = 8%; Interest rate on one-year French deposits = 6%; Current spot rate: 100 yens per euro. Further suppose that based on your research on the two countries, you expect the spot rate is going to be 105 yens per euro a year from now. Round numbers to 3 decimal points. Pick home and foreign country and setup your equation appropriately

1. Does uncovered interest parity (in exact form) hold?
2. If not, at what current spot rate would the uncovered interest parity hold (be satisfied)?
3. How might the current spot rate be driven to this level you found in (b)? Explain. (Explain the adjustment mechanism that occurs through trade of currencies that makes arbitrage disappear).

A company currently pays a dividend of $2.25 per share (D₀ = $2.25). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.8, the risk-free rate is 5%, and the market risk premium is 5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

Ms. Kathleen Boyd, director of logistics for the Scenic Calendar Company, wishes to evaluate

two methods of time series forecasting. She has collected quarterly calendar sales data from the

years 2003 and 2004.

2003 . 2004

Qtr. Actual Sales Qtr. Actual Sales

1 1200 1 1300

2 800 2 800

3 200 3 250

4 1000 4 1200

a.Use the moving averages technique to find forecasted sales for the third quarter of 2009 based on actual sales from the previous three quarters. (0,5p)

b. Use simple exponential smoothing to forecast each quarter’s sales in 2009, given that Mr. Clayton qualitatively forecasted 800 calendars for quarter 4, 2008. Mr. Clayton has assigned an alpha factor of 0,1 for time series sensitivity. (0,5p)

c. Repeat the simple exponential smoothing problem above (part 5b) with Mr Clayton employing an alpha factor of 0,8. (0,5p)

d. How well does the moving averages and simple exponential smoothing techniques seem to work in Mr. Clayton’s situation? In what ways do the techniques appear to fail? Explain. (0,5p)

IDENTIFY FORMULAS AND SHOW WORK.

Miller Corporation has a premium bond making semiannual payments. The bond pays an 8 percent coupon, has a YTM of 6 percent, and has a 13 years to maturity. The Modigliani Company has a discount bond making semiannual payments. The bond pays a 6 percent coupon, and has a YTM of 8 percent, and also has a 13 years maturity.

Assume a face value of $1,000 for both bonds. (a) If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? One day before maturity?

(b) Suppose the YTM increases 1 percent for each of the bonds (7 percent and 9 percent respectively). Calculate the Holding Period Yield of the one-year investment for each of the bonds (from today to one year from today).

Note: Holding Period Yield is the total effective annual return for the investor that buys the bond today and sells the bond in one year given the change in interest rates. The return can be decomposed in he income component (current yield) and the capital gain component (capital gain yield).

Company A deposit $10,000 now in the bank. Company A will keep deposits $1500 at the end of each payment period. The interest rate and the payment period information are given in the following table. How much will the company have after 5 years in the bank account? Assume each year contains 52 weeks/365 days, each quarter contains 13 weeks/90 days, each month contains 4 weeks/30 days.

You are a homebuilder with excess houses in inventory and the local economy heading towards a recession. In order to stimulate home sales, you offer the following promotion: 1.5% annual interest for the first 3 years of your new mortgage!

You have contracted with a local bank to offer 30-year, fully amortizing mortgages for your buyers at a rate of 3.95% per year with a .8 Loan-to-Value (LTV) ratio.

You have agreed to pay the bank the Present Value of the difference in monthly payments between their rate of 3.95%/year and your “teaser” rate of 1.5%/year.

Your promotion is working, and soon you have a home under contract to sell for $300,000. Using a Discount Rate of 5%/year, what is the amount which you willpay the bank at closing to compensate them for the 3-year teaser interest rate?

Use Excel. Use $$$ please