What are some of the key factors affecting investment returns - internal characteristics and external forces.

In our class example, I simplified the “annuity” prize option by assuming level, equal annual payments. Actually, this annuity prize option us now on an annuitized prize payment schedule with 30 beginning of year payments that start at a lower amount with each successive payment being 5% higher than the previous annual payment. The sum of these 30 annuitized payments equal the announced estimated jackpot amount with a lower one-time lump-sum payment also being available as the Cash Option.

A recent Mega Millions estimated jackpot amount is $300 million which is the undiscounted sum of the 26 annuity option payments with a Cash Option of $207 million. The first payment under the Annuity Option which would occur immediately is $4,515,432 with 29 additional annual payments with each payment being 5% larger than the previous one. Using this information and assuming you demand a 4% annual return, would you prefer the Annuity Option or the Cash Option if you have the winning ticket?

Please include the following to support your decision:

1. A complete schedule of all 30 annual payments under the Annuity Option. (Please use excel)

2. A comparison of the present value of all the payments under the Annuity Option and the present value of the Cash Option.

3. Use the Excel IRR function to find the interest rate that equates the PV of the annual payments with the cash option. This is the rate of return that the annuity option pays. Hint: you will have to deduct the first annual payment from the cash option amount for the initial (time zero) cash flow to calculate this rate.

4. Your decision.

Ann is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $3,200,000. Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront. Mortgage B has a 6% interest rate and requires Ann to pay zero fees upfront.

(A) Assuming Ann makes payments for 30 years, what is Ann’s annualized IRR from mortgage A?

(B) Assuming Ann makes payments for 30 years, what is Ann’s annualized IRR from mortgage B?

(C) Assuming Ann makes payments for 2 years before she sells the house and pays the bank the balance, what is Ann’s annualized IRR from mortgage A?

(D) Assuming Ann makes payments for 2 years before she sells the house and pays the bank the balance, what is Ann’s annualized IRR from mortgage B?

Halcyon Lines is considering the purchase of a new bulk carrier for $8.7 million. The forecasted revenues are $5.9 million a year and operating costs are $4.9 million. A major refit costing $2.9 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $2.4 million. a.

A. What is the NPV if the opportunity cost of capital is 9%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net present value $ b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. Will this borrowing opportunity affect your calculation of NPV?

Question 1) First define the goal of financial management, then discuss WHY this goal is more important than any other....

Question 2) Define the agency problem, and discuss how to resolve it from the perspective of a stockholder.

Please more than 400 words for each question and to be briefly described.

Thanks

The Brownstone Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. What is the yield to maturity at a current market price of $828? Round your answer to two decimal places. %

What is the yield to maturity at a current market price of $1,100? Round your answer to two decimal places. %

Would you pay $828 for one of these bonds if you thought that the appropriate rate of interest was 13% - that is, if rd = 13%?

Explain your answer.

I. You would buy the bond as long as the yield to maturity at this price does not equal your required rate of return.

II. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

III. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return.

IV. You would buy the bond as long as the yield to maturity at this price equals your required rate of return.

What are three legal forms of business organizations? What are their advantages and disadvantages?

is it cheaper to pay $2000 per month for campus housing or to purchase a house near campus for $100000 assuming that you are eligible for a 4% APR 30 year fixed rate HUD mortgage loan with 3 % down payment? Show your work.

The following​ table, LOADING...​, contains annual returns for the stocks of Company Upper A ​(Upper A​) and Company Upper B ​(Upper B​). The returns are calculated using​ end-of-year prices​ (adjusted for dividends and stock​ splits) retrieved from ​http://www.finance.yahoo.com/. Use the information to create an Excel spreadsheet that calculates the standard deviation of annual returns over the​ 10-year period for Upper A​, Upper B​, and of the​ equally-weighted portfolio of Upper A and Upper B over the​ 10-year period. ​(Hint​: Review the Excel screenshot on page 173​.)

   Projected Return      
Year   Asset A   Asset B   Asset C
2018   13%   15%   11%
2019   15%   13%   13%
2020   17%   11%   15%
You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following​ data: LOADING.... You have been told that you can create two portfolioslong dashone consisting of assets A and B and the other consisting of assets A and Clong dashby investing equal proportions ​(50 %​) in each of the two component assets. a. What is the average expected​ return, r overbar​, for each asset over the​ 3-year period? b. What is the standard​ deviation, s​, for each​ asset's expected​ return? c. What is the average expected​ return, r overbar Subscript p​, for each of the the​ portfolios? d. How would you characterize the correlations of returns of the two assets making up each of the portfolios identified in part c​? e. What is the standard deviation of expected​ returns, s Subscript p comma for each​ portfolio? f. Which portfolio do you​ recommend? Why?

You have been given the following information for PattyCake’s Athletic Wear Corp. for the year 2018: Net sales = $39,100,000. Cost of goods sold = $22,260,000. Other operating expenses = $6,800,000. Addition to retained earnings = $1,214,500. Dividends paid to preferred and common stockholders = $1,953,000. Interest expense = $1,870,000. The firm’s tax rate is 30 percent. In 2019: Net sales are expected to increase by $10.10 million. Cost of goods sold is expected to be 60 percent of net sales. Depreciation and other operating expenses are expected to be the same as in 2018. Interest expense is expected to be $2,145,000. The tax rate is expected to be 30 percent of EBT. Dividends paid to preferred and common stockholders will not change. Calculate the addition to retained earnings expected in 2019.

Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $12 million. The system will last 6 years. Do-It-Right sells a sturdier but more expensive system for $20 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30%, and the discount rate is 13%. Either machine will be replaced at the end of its life.

a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answers as a positive value. Enter your answers in whole dollars, not in millions.)

b. What is the equivalent annual cost of investing in the more expensive system?

Q8. During the planning process, if there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it. Identify and describe the three strategies that can be used to fill the strategic gap. (0.5 points) (20-70 words)

Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,270.

1. What is the bond's nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   What is the bond's nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   Would an investor be more likely to earn the YTM or the YTC?
   -Select-Since the YTM is above the YTC, the bond is likely to be called.Since the YTC is above the YTM, the bond is likely to be called.Since the YTM is above the YTC, the bond is not likely to be called.Since the YTC is above the YTM, the bond is not likely to be called.Since the coupon rate on the bond has declined, the bond is not likely to be called.Item 3
   
2. What is the current yield? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answer to two decimal places.
   %
   
   Is this yield affected by whether the bond is likely to be called?
   1. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
   2. If the bond is called, the current yield and the capital gains yield will remain the same.
   3. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
   4. If the bond is called, the current yield and the capital gains yield will both be different.
   5. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
   
   -Select-IIIIIIIVVItem 5
   
3. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calcuation, if reqired. Round your answer to two decimal places. Enter a loss percentage, if any, with a minus sign.
   %
   
   Is this yield dependent on whether the bond is expected to be called?
   1. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.
   2. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
   3. If the bond is expected to be called, the appropriate expected total return is the YTM.
   4. If the bond is not expected to be called, the appropriate expected total return is the YTC.
   5. If the bond is expected to be called, the appropriate expected total return will not change.