When creating a budget, how much should you factor variances into such an analysis?

P.8. Opportunity cost of capital. F&H Corp. continues to invest heavily in a declining industry. Here is an excerpt from a recent speech by F&H’s CFO:

     We at F&H have of course noted the complaints of a few spineless investors and uninformed security analysts about the slow growth of profits and dividends. Unlike those confirmed doubters, we have confidence in the long-run demand for mechanical encabulators, despite competing digital products. We are therefore determined to invest to maintain our share of the overall encabulator market. F&H has a rigorous CAPEX approval process, and we are confident of returns around 8% on investment. That’s a far better return than F&H earns on its cash holdings. The CFO went on to explain that F&H invested excess cash in short-term U.S. government securities, which are almost entirely risk-free but offered only 4% rate of return.

a. Is a forecasted 8% return in the encabulator business necessarily better than a 4% safe return on short-term U.S. government securities? Why or why not?

b. Is F&H’s opportunity cost of capital 4%? How in principle should the CFOdetermine the cost of capital?

Discussion board:

Risk, Return, and the Capital Asset Pricing ModelAs a first day intern at Tri-Star Management Incorporated the CEO asks you to analyze the following in-formation pertaining to two common stock investments, Tech.com Incorporated and Sam’s Grocery Cor-poration. You are told that a one-year Treasury Bill will have a rate of return of 5% over the next year. Also, information from an investment advising service lists the current beta for Tech.com as 1.68 and for Sam’s Grocery as 0.52. You are provided a series of questions to guide your analysis.

Estimated Rate of Return

Economy             Probability          Tech.com            Sam’s Grocery                   S&P 500

Recession            30%                        –20%                                     5%                          – 4%

Average               20%                        15%                                        6%                          11%

Expansion            35%                        30%                                        8%                          17%       

Boom                    15%                        50%                                        10%                        27%

1. Which of these two-stock portfolios do you prefer? Why

A loan of $100,000 is made today. This loan will be repaid by 10 level repayments, followed by a final smaller repayment, i.e., there are 11 repayments in total. The first of the level repayments will occur exactly 2 years from today, and each subsequent repayment (including the final smaller repayment) will occur exactly 1 year after the previous repayment. Explicitly, the final repayment will occur exactly 12 years from today. If the interest being charged on this loan is 8.5% per annum compounded half-yearly, and the final smaller repayment is $300, Calculate the loan outstanding exactly 11 years from today.

The current spot price of Copper is $2.7445 per pound. The storage costs are $0.05 per pound per year payable monthly. Physical holding of copper now can yield $0.13 per pound per year which is achievable monthly. The price of a 9-month futures contract of copper is currently listed as 2.7685. Assume that interest rates are 10% per annum and monthly compounded.

a) If the cost-of carry relationship is held under no-arbitrage conditions, what should the 9-month futures price be (4 d.p.)?

b) Is the listed 9-month futures price provide arbitrage opportunity (assume transaction costs are negligible)? Justify.

c) If the listed futures price is correct, what would be the underlying annual yield.

show all steps ,formula ,and calculations

1. a) A call option with a strike price of $68 on a stock selling at $82 costs $15.3. What are the call option’s intrinsic and time values?

2. b) A put option on a stock with a current price of $37 has an exercise price of $39. The price of the corresponding call option is $2.85. According to put-call parity, if the effective annual risk-free rate of interest is 4% and there are three months until expiration, what should be the price of the put?

3. c) A call option on Jupiter Motors stock with an exercise price of $75 and one-year expiration is selling at $6. A put option on Jupiter stock with an exercise price of $75 and one-year expiration is selling at $4.0. If the risk-free rate is 10% and Jupiter pays no dividends, what should the stock price be? show all steps and formula plz

Write a note on the salient features of a corporation explaining the benefits and limitations to the firm and to the investors with this form of business organization.

Consider a two-state call option valuation problem given the current stock price $240 and the two possibilities for the change in the price are $270 and $170. Also, the strike price is $250 and the risk-free rate is 10%. a) What is the hedge ratio of the call? b) Calculate the value of a 1-year call option using discrete compounding. show all steps and formula please

Laquita deposits $5500 in her retirement account every year. If her account pays an average 6% interest and she makes 38 deposits before she retires, how much monet can she withdraw in 20 equal payments beginning one year after her last deposit? please show cash flow diagram and solve NOT with excel but with the interest rate formula equations!!!

Stock A has an expected annual return of 24% and a return standard deviation of 28%. Stock B has an expected return 20% and a return standard deviation of 32%. If you are a risk averse investor, which of the following is true?

A. You would never include Stock B in your portfolio, as it offers a lower return and a higher risk.

B. Under certain conditions you would put all your money in Stock B.

C. You would never invest in either one of the two stocks.

D. For a low enough correlation coefficient between the returns of the two stock, you might want to invest in both.

E. I choose not to answer

Please give an explanation :)

Assume a call option on Greshak Corp. currently sells for $6.00 in the market and the current rate on S-T Federal securities is 5.00%. The call option on Greshak's stock has 4 months to expiration and a strike price of $35.00. If the underlying shares of Greshak Corp. sell for $46.00, what is the price of a put option with a $52.00 strike price and 4 months to expiration (assume the options are European style options)?  YOU MUST SHOW ALL WORK TO RECEIVE CREDIT. MAKE SURE YOU USE AT LEAST 4 DECIMAL PLACES IN ALL CALCULATIONS

A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $22,478.00 per year (all expenses included). Tuition will increase by 3.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 7.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years)

The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college. (ASSUME that the money stays invested during college and the professor will make his last deposit in the account when Sam, the OLDEST daughter, starts college.)

You have just sold your house for $ 1,100, 000 in cash. Your mortgage was originally a​ 30-year mortgage with monthly payments and an initial balance of $ 800,000. The mortgage is currently exactly​ 18½ years​ old, and you have just made a payment. If the interest rate on the mortgage is 7.75 % ​(APR), how much cash will you have from the sale once you pay off the​ mortgage? ​(Note: Be careful not to round any intermediate steps less than six decimal​ places.)

Cash that remains after payoff of mortgage is ​[...]? Round to the nearest dollar.

how do a corporation leverage transfer pricing and how import duties might influence transfer pricing policies?