4. (a) As a stockbroker, you have been approached by a client seeking to establish a diversified portfolio of domestic shares. After identifying the client’s investment needs, you recommend the client use an exchange traded fund (ETF) to achieve her investment objectives. Explain to the client how an ETF will achieve the objective of a diversified share portfolio.

(b) The client also wishes to gain an investment exposure to the international share markets. Is it possible to use ETFs to achieve this objective? Explain.

3. (a) Discuss the secondary market role of a stock exchange and its importance to the corporation. Illustrate your answer by using examples.

(b) What is meant by the liquidity of the share market? Explain why liquidity in the secondary market is important both to shareholders and to the corporation.

Using a car industry, describe five different brands and how they have been positioned

. What happens to future values as the length of time involved increases?   What happens to present values as the length of time involved increases?

What are the total return, the current yield, and the capital gains yield for the discount bond? (Assume the bond is held to maturity and the company does not default on the bond.)

You are trying to evaluate a private firm’s potential as a good investment opportunity. Your mentor at the investment bank you interned during the summer told you to collect information on comparable firms, which will help you find the WACC of the private firm. The private firm has ND/E ratio of 2. The risk free rate is 2%. Market risk premium is 5%. Cost of debt for the private firm is assumed is 6%. The tax rate is 50%. The following table lists the information you have gathered:

What is the net debt for firm A?

Q2. Calculate the asset beta for firm D.

Q3. What is the average asset beta you should use combining all the comparable firms?

Q4. What is the equity beta for the private firm?

Q5. What is the cost of equity for the private firm? 0.0/1.0 point (graded) Input the cost of equity for the private firm. （use the result from problem 3） ______ %(keep two decimal points)

Jumbo Enterprises plans to borrow R1 000 000 for one year. The stated interest rate is 15% per annum.

Required:

Use the information provided above to calculate the effective interest rate if:

4.3.1 The interest is discounted

4.3.2 There is a 25% compensating balance requirement

Question 3 [36]

Rapid Print CC is a company specialising in 3D printing for commerce and industry. The management committee is considering adding an additional 3D printer to its production facilities and is considering purchasing one of two suitable 3D printers available for their purposes. Both printers, LaserX and 3Dpro, are under consideration. The printing manager and the financial manager can expect a minimum return of 10% per annum from either printer. The acquisition price for LaserX is R350 000 and for 3Dpro it is R600 000. They have also prepared the following expected net cash flows for the expected 4-year life span of the two printers:

LaserX                3Dpro

80 000                150 000

100 000               250 000

150 000               275 000

180 000               300 000

Required

Show all calculations.

3.1. Calculate the net present value (NPV) for both printers and the internal rate of return (IRR) for LaserX. The IRR for 3Dpro = 20%. It is recommended that you use 22% as an alternative cost of capital for LaserX. (29)

3.2. Recommend to Rapid Print’s management which printer they should consider purchasing, providing specific reasons for your recommendations.

 Lisa Simpson wants to have $1,400,000 in 30 years by making equal annual​ end-of-the-year deposits into a​ tax-deferred account paying 11.75 percent annually. What must​ Lisa's annual deposit​ be?

Explain the implications of the “Degree of Operating Leverage”.

1. Suppose you negotiate a selling price of $29,995 for a Ford Explorer. You make a down payment of 10% of the selling price and finance the remaining balance for 5 years at an annual interest rate of 8.3%. The sales tax is 8.3% of the selling price, and the license fee is 0.4% of the selling price. Find the monthly payment. (Round your answer to the nearest cent.)

$ _________

2. A mutual fund has $600 million worth of stock, $600,000 in cash, and $1 million in other assets. The fund's total liabilities amount to $2 million. There are 10million shares outstanding. You invest $9,000 in this fund. How many shares are you purchasing? (Round your answer down to the nearest whole number.)

_________ shares

3. A credit card account had a $285 balance on March 5. A purchase of $181 was made on March 12, and a payment of $100 was made on March 28. Find the average daily balance if the billing date is April 5. (Round your answer to the nearest cent.)

$ ________

4. Use the given partial stock table. Round dollar amounts to the nearest cent when necessary.

Consider the following for Boeing (BA).

(a) What is the difference between the highest and lowest prices paid for this stock during the last 52 weeks?

$ _______

(b) Suppose that you own 850 shares of this stock. What dividend do you receive this year?

$ _______

(c) How many shares of this stock were sold during the trading day?

_______ shares

(d) Did the price of a share of this stock increase or decrease during the day shown in the table?

1-increase

2- decrease   

(e) What was the price of a share of this stock at the start of the trading day?

$ _______

​(​Break-even

point and operating

leverage​)

Footwear Inc. manufactures a complete line of​ men's and​ women's dress shoes for independent merchants. The average selling price of its finished product is

​$85

per pair. The variable cost for this same pair of shoes is

​$60

.

Footwear Inc. incurs fixed costs of

​$180 comma 000

per year.

a. What is the​ break-even point in pairs of shoes sold for the​ company?

b. What is the dollar sales volume the firm must achieve to reach the​ break-even point?

c. What would be the​ firm's profit or loss at the following units of production​ sold:

6 comma 000

pairs of​ shoes?

12 comma 000

pairs of​ shoes?

15 comma 000

pairs of​ shoes?

How long will it take to pay off a loan of $45,000 at an annual rate of 8 percent compounded monthly if you make monthly payments of $600? Use five decimal places for the monthly percentage rate in your calculations.

You are graduating from college at the end of this semester and after reading the The Business of Life box in this​ chapter, you have decided to invest $5100 at the end of each year into a Roth IRA for the next 47 years. If you earn 9 percent compounded annually on your investment, how much will you have when you retire in 47 years? How much will you have if you wait 10 years before beginning to save and only make 37 payments into your retirement account?

• (1) How is the future, present, and past reflected in terms of interior and exterior finance?