What is the essential idea underlying Risk - adjusted return on Capital Models and how does this model relate to the concept of duration?

Healthcare Financing

Explain the meaning of corporate status in relation to healthcare organizations, and the advantages corporate status provides.

A bicycle manufacturer currently produces 274 000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $ 1.80 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct​ in-house production costs are estimated to be only $ 1.50 per chain. The necessary machinery would cost $ 242000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a​ ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $ 33000 of inventory and other working capital upfront​ (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $ 18150. If the company pays tax at a rate of 35 % and the opportunity cost of capital is 15 %​, what is the net present value of the decision to produce the chains​ in-house instead of purchasing them from the​ supplier?
Project the annual free cash flows ​(FCF​) of buying the chains.
The annual free cash flows for years 1 to 10 of buying the chains is ​$ ____________. ​ (Round to the nearest dollar. Enter a free cash outflow as a negative​ number.)
Compute the NPV of buying the chains from the FCF. The NPV of buying the chains from the FCF is ​$ ________. ​(Round to the nearest dollar. Enter a negative NPV as a negative​ number.)
Compute the initial FCF of producing the chains. The initial FCF of producing the chains is ​$ ___________. ​(Round to the nearest dollar. Enter a free cash outflow as a negative​ number.)
Compute the FCF in years 1 through 9 of producing the chains. The FCF in years 1 through 9 of producing the chains is ​$ _____. ​(Round to the nearest dollar. Enter a free cash outflow as a negative​ number.)
Compute the FCF in year 10 of producing the chains. The FCF in year 10 of producing the chains is ​$ ______. ​(Round to the nearest dollar. Enter a free cash outflow as a negative​ number.)
Compute the NPV of producing the chains from the FCF. The NPV of producing the chains from the FCF is ​$ ______. ​ (Round to the nearest dollar. Enter a negative NPV as a negative​ number.)
Compute the difference between the net present values found above. The net present value of producing the chains​ in-house instead of purchasing them from the supplier is ​$__________. ​ (Round to the nearest​ dollar.)

You are a manager at Percolated​ Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your​ office, drops a​ consultant's report on your​ desk, and​ complains, "We owe these consultants $1.6 million for this​ report, and I am not sure their analysis makes sense. Before we spend the $23 million on new equipment needed for this​ project, look it over and give me your​ opinion." You open the report and find the following estimates​ (in millions of​ dollars):

All of the estimates in the report seem correct. You note that the consultants used​ straight-line depreciation for the new equipment that will be purchased today​ (year 0), which is what the accounting department recommended. The report concludes that because the project will increase earnings by $5.109 million per year for ten​ years, the project is worth $51.09 million. You think back to your halcyon days in finance class and realize there is more work to be​ done!  

​First, you note that the consultants have not factored in the fact that the project will require $14 million in working capital upfront​ (year 0), which will be fully recovered in year 10.​ Next, you see they have attributed $1.84 million of​ selling, general and administrative expenses to the​ project, but you know that $0.92 million of this amount is overhead that will be incurred even if the project is not accepted.​ Finally, you know that accounting earnings are not the right thing to focus​ on!

a. Given the available​ information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed​ project?

b. If the cost of capital for this project is 16%​,

what is your estimate of the value of the new​ project?

Given the available​ information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed​ project?

The free cash flow for year 0 is ​$____million. ​ (Round to three decimal places and enter a decrease as a negative​ number.)

The free cash flow for years 1 to 9 is ​$_____million. ​(Round to three decimal places and enter a decrease as a negative​ number.)

The free cash flow for year 10 is ​$____million. ​ (Round to three decimal places and enter a decrease as a negative​ number.)

b. If the cost of capital for this project is 16 %

what is your estimate of the value of the new​ project?

The value of the project is ​$____million. ​ (Round to three decimal​ places.)

Arnold Inc. is considering a proposal to manufacture​ high-end protein bars used as food supplements by body builders. The project requires use of an existing​ warehouse, which the firm acquired three years ago for $ 3million and which it currently rents out for $108,000. Rental rates are not expected to change going forward. In addition to using the​ warehouse, the project requires an upfront investment into machines and other equipment of $1.4million. This investment can be fully depreciated​ straight-line over the next 10 years for tax purposes. ​ However, Arnold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for $472,000. ​ Finally, the project requires an initial investment into net working capital equal to 10 percent of predicted​ first-year sales. ​ Subsequently, net working capital is 10 percent of the predicted sales over the following year. Sales of protein bars are expected to be $ 4.9million in the first year and to stay constant for eight years. Total manufacturing costs and operating expenses​ (excluding depreciation) are 80 percent of​sales, and profits are taxed at 30 percent.
a. What are the free cash flows of the​ project?
b. If the cost of capital is 15 % what is the NPV of the​ project?
a. What are the free cash flows of the​ project?
The FCF for year 0 is ​$ ____million. ​ (Round to three decimal​ places.)
The FCF for years​ 1-7 is ​$____million. ​ (Round to three decimal​ places.)
The FCF for year 8 is ​$_____ million. ​ (Round to three decimal​ places.)
b. If the cost of capital is 15 % what is the NPV of the​ project?
The NPV of the project is ​$_____million. ​ (Round to three decimal​ places.)

9. Compute the average annual return and standard deviation of an evenly weighted portfolio of stocks and 10-year government bonds over the past five years ended December 31, 2018?

Suppose that you wish to save enough to fund $4,500 per month (in today's purchasing power) for 30 years of retirement. The fund you invest in during your working (or saving) years is expected to earn interest at 6% AR. At retirement, you will move your retirement funds into a less risky investment earning 4% AR. If you are 35 years from retirement, find the level of monthly savings (in current dollars) that will be required.

Please show work :)

You wish to purchase a new pickup truck. The dealership offers to finance $40,000 at a 2% annual rate (AR) with 36 monthly payments. The first payment starts 6 months from now. Market interest rates are 4% AR. Determine your true cost of purchasing the pickup (i.e., the present value of your payments).

Please show work. Thank you :)

A Chinese steelmaker is considering its strategy to expand globally. It is considering two possible choices. Choice A involves acquiring mining assets in Canada. Choice B involves acquiring a mining company in Australia. Forecasts indicate that the Canadian dollar is expected to appreciate while Australian dollar is expected to depreciate substantially over the next 3 years. Should the Chinese company expand into Australia or Canada? What factors may affect its decision?

1) A bank with a leverage ratio of 15 has a cost of debt of 2%pa and a portfolio of assets with an expected yield of 4%pa. What are the expected ROA net of debt funding costs and the expected ROE of the bank, using the approach to defining leverage taken in the lecture slides? Show your workings.

2) What will the ROA and ROE actually be if the yield on assets turns out to be 3%? Show your workings. (1 mark)

3) What will the ROA and ROE actually be if the yield on assets turns out to be 1%? Show your workings.

4) What is the unweighted bank’s capital (or E/A) ratio (i) for a leverage ratio of 20 and (ii) for a leverage ratio of 30? Show your workings. (1 mark)

5) Redo the above calculations in parts 1) and 3) for a leverage ratio of 25. What affect does the higher leverage ratio have on your answers? Show your workings.

6) What is the relationship between a bank’s capital ratio and the risks and returns faced by (i) its shareholders and (ii) its creditors? Explain your answers.

just need to answer question 5 and 6

Please answer the following below using your Automobile Loan Calculator workbook along with the following information:

• Purchase Price is $33,500
• Down Payment is $3,500
• Trade-in Value is $4,500
• Customers get $1,000 if they elect to take the Rebate
• Use the Finance Rate Table provided below:

• Term	No Rebate	Rebate
  1	12.5%	19.7%
  2	14.9%	20.9%
  3	17.3%	22.1%
  4	18.5%	23.3%
  5	19.7%	24.5%

A) If a customer elects to take the Rebate, what is the Loan Amount?

B) If a customer does not elect to take the rebate, what would the monthly payment be for a 3-year loan?

C) If a customer elects to take the $1,000 Rebate, what would be the Total Payments for a 5-year loan?

D) What is the difference in Monthly Payment amounts for customers who do and do not elect to take the Rebate for a 1-year loan?

E) What is the difference in Finance Charges for customers who do and do not elect to take the Rebate for a 1-year loan?

Please explain the below answer in simple terms:

Q: Explain how are nominal and real returns of equity investment related with inflation
A: Nominal returns of equities are positively related to inflation (0.31) where entirely all of the correlation is between capital gains and inflation, while dividends and inflation are uncorrelated. The real returns of equities are uncorrelated with inflation. This implies that equities are a hedge to inflation that is they are unaffected by inflation.

Company Y wants to deposit money in a bank account in order to be able to withdraw €50,000 after the first three years, and €60,000 after additional two years. The bank offers 6% annual interest rate for the first three years and 8% interest for the following years. What amount should Y deposit now?

Please answer the following below using your Automobile Loan Calculator workbook along with the following information:

• Purchase Price is $33,500
• Down Payment is $3,500
• Trade-in Value is $4,500
• Customers get $1,000 if they elect to take the Rebate
• Use the Finance Rate Table provided below:

• Term	No Rebate	Rebate
  1	12.5%	19.7%
  2	14.9%	20.9%
  3	17.3%	22.1%
  4	18.5%	23.3%
  5	19.7%	24.5%

A) If a customer elects to take the Rebate, what is the Loan Amount?

B) If a customer does not elect to take the rebate, what would the monthly payment be for a 3-year loan?

C) If a customer elects to take the $1,000 Rebate, what would be the Total Payments for a 5-year loan?

D) What is the difference in Monthly Payment amounts for customers who do and do not elect to take the Rebate for a 1-year loan?

E) What is the difference in Finance Charges for customers who do and do not elect to take the Rebate for a 1-year loan?