Suppose you have $250,000 of loan. The terms of the loan are that the yearly interest is 6% compounded quarterly. You are to make equal quarterly payments of such magnitude as to repay this loan over 30 years.
(Keep all your answers to 2 decimal places, e.g. XX.12.)
(a) How much are the quarterly payments?
(b) After 5 years' payments, what principal remains to be paid?
(c) How much interest is paid in the first quarter of the 6th year?
(d) How much is the total interest paid over the 30 years?
(e) If you have a lump sum payment of $20,000 at the end of 5 years, and maintain the same level of quarterly payment, when will you pay off your loan, i.e. how many years in total will you pay off the loan?
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An 8% coupon bond with 3 years to maturity has a yield of 7%. Assume that coupon is paid semi-annually and face value is $1,000.
(a) Calculate the price of the bond. (Keep 2 decimal places,
e.g. 90.12)
(b) Calculate the duration of the bond. (Keep 4 decimal places,
e.g. 5.1234)
(c) Calculate this bond's modified duration. (Keep 4 decimal
places, e.g. 5.1234)
(d) Assume that the bond's yield to maturity increases from 7% to
7.2%, estimate the new price of the bond.
(Keep 2 decimal places, e.g. 90.12)
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Discuss enterprise risk management (ERM) in its most current form and how it has evolved to assess risk management in today's environment.
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Discuss alternatives available for companies to raise capital. Describe the pros and cons a company must analyze prior to going public.
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Morris-Meyer Mining Company must install $1.4 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the required amount. Alternatively, a Nevada investment banking from that represents a group of investors believes that it can arrange for a lease financing plan. Assume that the following facts apply: The equipment falls in the MACRS 3-year class. The applicable MACRS rates are 33%, 45%, 15%, and 7%. Estimated maintenance expenses are $65,000 per year. Morris-Meyer's federal-plus-state tax rate is 45%. If the money is borrowed, the bank loan will be at a rate of 14%, amortized in 4 equal installments to be paid at the end of each year. The tentative lease terms call for end-of-year payments of $300,000 per year for 4 year. Under the proposed lease terms, the lessee must pay for insurance, property taxes, and maintenance. The equipment has an estimated salvage value of $300,000, which is the expected market value after 4 years, at which time Morris-Meyer plans to replace the equipment regardless of whether the firm leases or purchases it. The best estimate for the salvage value is $300,000, but it may be much higher or lower under certain circumstances. To assist management in marking the proper lease-versus-buy decision, you are asked to answer the following questions. Assuming that the lease can be arranged, should Morris-Meyer lease or borrow and buy the equipment? Explain. Round your answer to the whole number. Net advantage to leasing (NAL) is $ . (Input the minus sign if the cost of leasing the machinery is more than the cost of owning it.)
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Alexis Company uses
979979
units of a product per year on a continuous basis. The product has a fixed cost of
$4242
per order, and its carrying cost is
$44
per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock.
a. Calculate the EOQ.
b. Determine the average level of inventory.
(Note:
Use a 365-day year to calculate daily usage.)
c. Determine the reorder
point.
d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity.
a. Alexis' EOQ is
nothing
units. (Round to the nearest whole number.)
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WHen starting a small staffing/recruiting firm decide how many sales (in units) you would make in a year (factoring in all decisions made so far--target market, competition, etc.).What is your gross revenue projection for the year? (unit price x units sold = revenue) 2. There are fixed costs to consider. Give some basic examples of fixed cost expense categories for a business such as yours. Estimate what the associated fixed cost expenses will be on an annual basis for your venture. What is this figure? 3. There are variable costs to consider. Give some basic examples of variable cost expense categories for a business such as yours. Estimate what the associated variable cost expenses will be on a per-unit produced/sold basis. Based on sales projections in #1 above, what then is the total variable cost expenses for the year? 4. Combine total fixed costs and total variable costs. This is your total expenses. What is this figure? 5. Figure your net profit from gross revenue minus total expenses. What is this figure? 6. What is your break-even point in dollars? What is your break-even point in units sold?
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The current stock price of Johnson & Johnson is $62, and the stock does not pay dividends. The instantaneous risk-free rate of return is 3%. The instantaneous standard deviation of J&J's stock is 35%. You want to purchase a put option on this stock with an exercise price of $53 and an expiration date 72 days from now. Using Black-Scholes, the put option should be worth ______ today.
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Assume a primary care clinic has the following in costs:
Wages and benefits = $280,000
Rent = $10,000 annually
Depreciation = $24,000
Utilities = $3,000
Medical supplies = $50,000
Administrative supplies = $8,000
Visits = 15,000
Assume all costs are fixed except medical supplies.
What is the clinic’s underlying cost structure? ______________
What are the clinic’s total expected costs? _______________
What would the estimated costs be if visits were 5% over expected? ___________
What if they were 8% under expected? ____________
What is the average cost per visit for:
15,000 visits = ______________
5% above = _______________
8% below = ___________________
What price do services need to be set at for the clinic to break even at 15,000 visits? _________________
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Old Southwest Canning Co. has determined that any one of four machines can be used in its chili-canning operation. The cost and revenues of the machines are estimated below, and all machines have a 7-year life. If the minimum attractive rate of return is 10% per year, determine the incremental rate of return of the last comparison on the basis of a rate of return analysis. (As of %)
| Machine | First Cost, $ | Annual Revenue, $ |
| 1 | −105,000 | 21,000 |
| 2 | −123,000 | 41,000 |
| 3 | −312,000 | 78,000 |
| 4 | −348,000 | 58,000 |
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| A7X Corp. just paid a dividend of $1.30 per share. The dividends are expected to grow at 35 percent for the next 8 years and then level off to a growth rate of 6 percent indefinitely. |
| If the required return is 14 percent, what is the price of the
stock today? |
Multiple Choice
$92.39
$2.93
$90.58
$88.77
$66.62
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Mr. John decides to start a small business with the intention to expand it in the future. He has some capital, but he fears he may lose some of his personal assets if the business fails. Also, Mr. John is not sure he has enough capital to proceed with a sustainable business. At the same time, he has some doubts in sharing the ownership of his business with partners that had not to participate in the 'creation of his business project'.
Having in mind these issues, advise Mr. John regarding what you consider to be the optimal business type for a safer, and with more prospects of development and sustainable growing business. Argue by comparing the business types that can be considered a viable option.
(400-700 words)
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Over a five-year period, the quarterly change in the price per share of common stock for a major oil company ranged from -6% to 10%. A financial analyst wants to learn what can be expected for price appreciation of this stock over the next two years. Using the five-year history as a basis, the analyst is willing to assume that the change in price for each quarter is uniformly distributed between -6% and 10%. Use simulation to provide information about the price per share for the stock over the coming two-year period (eight quarters).
| Quarter | r | Return % |
|---|---|---|
| 1 | 0.54 | % |
| 2 | 0.98 | % |
| 3 | 0.17 | % |
| 4 | 0.16 | % |
| 5 | 0.50 | % |
| 6 | 0.77 | % |
| 7 | 0.41 | % |
| 8 | 0.53 | % |
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