You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97.

Calculate Jensen’s alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places.)

You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97.

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

You are given the following information for Smashville, Inc.  

During the year, Smashville, Inc., had 25,000 shares of stock outstanding and depreciation expense of $15,000. Calculate the book value per share, earnings per share, and cash flow per share. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Mr. James, an ardent photographer has decided to take his for steps on realizing his entrepreneurial dream. He has been mulling over various options and has narrowed them down to 2 options. Mr. James asks for your assistance in resolving the dilemma that he faces. Option 1 Rent an office at La Lucia Mall and purchase photo developing equipment and other devices necessary for this venture. This will involve the actual printing/development of photos, “burning” of CDs/DVD’s, etc. Option 2 Purchase a state of the art Nikon Camera Kit and take photos/record videos of special events (weddings, birthdays, anniversaries, etc.). This will entail spending on an advertising campaign in order to aggressively seek market share. Project cost and other data Option 1 Option 2 Cost of investments (Total) 400 000 90 000 Expected useful life 5 years 5 years Salvage value 50 000 10 000 Cost of capital (After tax) 9% Project Revenues Year 1 150 000 20 000 Year 2 130 000 30 000 Year 3 80 000 50 000 Year 4 60 000 30 000 Year 5 40 000 15 000 Required: 2.1 If James requires a payback period of no more than 3 1/2 years which project should he choose? Show calculations. (8) 2.2 Suggest flaws in the valutitaion method (payback period).(2) 2.3 Use the NPV method to test which project is more viable. (10)

List five goals of a firm and Select which goals you will set for your organization as a manager and give the reason why you have selected those goals. (260 words

Use this textbook as a guide -Principles of Managerial Finance (14th ed.) by Gitman, Lawrence & Zutter, Chand

16. Lowell Corp. is an all-equity firm with $820,000. It now wants to issue debt and raise the debt ratio to 0.40 from 0.0 without changing total assets. It plans to use the proceeds of the debt issue to retire some equity using a share repurchase. How much cash should Lowell borrow?

a.            $228,000

b.            $288,000

c.            $328,000

d.            $388,000

e.            $492,000

17. Nashua Inc.'s debt ratio is .25. That is, for every $100 of total assets, it has borrowed $25. What would be the value of its equity multiplier to use in a DuPont equation? Hint: You might need to work out the equation for equity multiplier from the debt ratio equation!

a.            0.25

b.            1.00

c.            1.25

d.            1.33

e.            4.00

18. XYZ Corp.'s sales last year were $300,000, and its net income was $20,000. What was its profit margin?

a. 6.67%

b. 7.66%

c. 8.21%

d. 8.63%

e. 9.06%

19. ABC Corp. is an all equity firm with total assets of $400,000, with sales of$600,000 and net income of $25,000. Management wants to lower costs to increase ROE to around 15%. They do not plan on changing sales or issuing debt. What profit margin would be needed to achieve this higher ROE? Hint: DuPont Equation - What is equity multiplier here?

a.            9.45%

b.            9.85%

c.            10.00%

d.            10.45%

e.            10.85%

20. Weston Industries had soles of $300,000, assets of $175,000, a profit margin of 5.2%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $50,000 without affecting either sales or costs. Had it reduced its assets by this amount, and had the debt/assets ratio, sales, and costs remained constant, how much would the ROE have changed? Hint: First Calculate ROE for the present amount of assets – Does the profit margin change after the reduction in assets?

a. 4.28%

b. 4.56%

c. 5.01%

d. 5.52%

e. 6.07%

In a financial plan, how is the amount of borrowing determined?

A.In direct proportion to sales growth

B.By the needed increase in fixed assets

C.By the increase in total assets minus the increase in cash

D.By management's D/E decision

PLEASE explain what is D/E decision

Are there any significant difference between working capital management and working capital investment?

Consider a company that is financing an expansion, with the expansion financed by
the owners. Projected free cash flows are -$25 million in year 1, +$10 million in year 2, +30 million
in year 3, and +$50 million in year 4. After year 4, the cash flows are expected to grow at a constant
rate of 6%. For the company, the weighted average cost of capital is 14%, short-term investments
for the company are $80 million, company debt is at $150 million, the amount of preferred stock
is at $30 million, and there are 5 million shares outstanding. A.) Using a free cash flow valuation
approach, what is the value from operations for the company? B.) What is the total intrinsic value
of the company? C.) What is the estimated intrinsic value of the equity? D.) What is the estimated
intrinsic stock price per share?

In a slow year, Deutsche Burgers will produce 2.400 million hamburgers at a total cost of $3.900 million. In a good year, it can produce 4.200 million hamburgers at a total cost of $4.800 million. a. What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) b. What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is the average cost per burger when the firm produces 1 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. What is the average cost per burger when the firm produces 2 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. Why is the average cost lower when more burgers are produced? The fixed costs are spread across more burgers. Variable costs are lower per burger. Fixed costs are constant per burger.

I need an to check my answer with 4 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 $682,000. 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 $1.30 per trap and believes that the traps can be sold for $5 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 8%.

a. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.)

b. By how much would NPV increase if the firm depreciated its investment using the 5-year MACRS schedule? (Do not round intermediate calculations. Enter your answer in whole dollars not in millions.)

Use the MACRS depreciation schedule.

1. After working for three years, you decide to purchase your first home, which has a sales price of $350,000. With $70,000 down payment, what is your monthly mortgage payments for a 30-year loan at an annual interest rate of 4.75%. Assume the payments are made at the end of each period (i.e., ordinary annuity).

a) Calculate the monthly installments

b) Build an amortization table for the life of loan. For each payment, show the beginning loan balance, interest payment, principal payment, and ending balance.

After years of playing the lottery, you just won $10,000,000. Now, you have to figure out how you want it paid to you. You can take a lump sum now before tax, (yes, Uncle Sam will eventually get his part), or you can take annual payments at the end of each year (also before tax). The interest rate is 4% and if you do take the payments, they will be paid over 20 years.


1) What is the lump sum payment that you would receive today?


2) How much would you have received in total at the end of the 20 years if you took the payments?

Calculating Rates of Return [LO3]