1. Explain the concept of the yield curve for bonds and distinguish between the expectations theory and market segmentation theory of the term structure of interest rates.                                                       

Discuss the role of Credit Default Swaps (CDS) in transferring the default risk on corporate bonds, in the context of Global Financial Crisis 2008.

A natural gas energy company must choose between two mutually exclusive extraction projects, and each costs $12 million. Under Plan D, all the natural gas would be extracted in 1 year, producing a cash flow at t = 1 of $14.4 million. Under Plan E, cash flows would be $2.1 million per year for 20 years. The firm’s WACC is 13%.

a. Construct NPV profiles for Plans D and E, identify each project’s IRR, and show the approximate crossover rate.

b. Is it logical to assume that the firm would take on all available independent, average-risk projects with returns greater than 13%? If all available projects with returns greater than 13% have been undertaken, does this mean that cash flows from past investments have an opportunity cost of only 13% because all the company can do with these cash flows is to replace money that has a cost of 13%? Does this imply that the WACC is the correct reinvestment rate assumption for a project’s cash flows?

Please show all calculations.

1. A firm reinvests 60% of its earnings in projects with return on equity of 10%. The market capitalization rate is 15%. If the expected year-end dividend is $2/share and paid-out earnings of $5/share, find out the growth rate and present value of the growth opportunity.                              

2. Given:

Long-term government bond rate                                                       4%

Historical risk premium on the market                                                7%

Beta estimate of Sylvia’s Separates                                                   0.95

Price range of Sylvia’s Separates’ share price                                 $5 - $9

Proportion of earnings retained                                                          0.6

Average return on retained earnings                                                 12%

Proposed dividend per share next year                                             $0.30

Current annual interest on company’s loan from bank                  6%

Tax rate                                                                                                    25%

Based on the information given above,

1. find out the required rate of return using CAPM                 

2. find out the growth rate and calculate the required rate of return based on Gordon’s dividend growth model (DGM)                

3. Explain the Gordon growth model as a technique for the valuation of common stocks and discuss what kind of stocks this model is more appropriate for valuing.                                                              

4. Discuss how PE ratio can be used in equity valuation and its pitfalls.

Using the full case opinion of Gerber & Gerber, P.C. v. Regions Bank, set forth in your own words a summary of the court's ruling based on the facts and law of the case. You should re-read the entire opinion before beginning this assignment. Do not copy the language of the case opinion.

The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity. The firm’s cost of capital is 15%. The cash flows for each project are given in the following table.

ALei Industries has credit sales of $158 million a year. Alley's management reviewed its credit policy and decided that it wants to maintain an average collection period of 35 days.

A. What is the maximum level of accounts receivable that ALei can carry and have a 35-day average collection period?

B. If ALei's current accounts receivable collection period is 60 days, how much would it have to reduce its level of accounts receivable in order to achieve its goal of 35 days?

HELP PLEASE.

The risk-free rate is 1.58% and the market risk premium is 9.51%. A stock with a β of 1.17 just paid a dividend of $2.65. The dividend is expected to grow at 21.07% for three years and then grow at 4.98% forever. What is the value of the stock?

Round to 2 decimal places.

Consider the following information on Stocks I and II: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock I Stock II Recession .24 .030 −.34 Normal .59 .340 .26 Irrational exuberance .17 .200 .44 The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. Requirement 1: (a) Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).) Stock I Beta Standard deviation % (b) Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).) Stock II Beta Standard deviation % Requirement 2: (a) Which stock has the most systematic risk? (b) Which one has the most unsystematic risk? (c) Which stock is “riskier”?

Netflix common stock has a​ beta=0.6.

The​ risk-free rate is 9%​,

and the market return is 14​%.

a.  Determine the risk premium on Netflix common stock.

b.  Determine the required return that Netflix common stock should provide.

c.  Determine​ Netflix's cost of common stock equity using the CAPM.

Consider the following information: Rate of Return if State Occurs State of Probability of State Economy of Economy Stock A Stock B Stock C Boom .69 .12 .06 .27 Bust .31 .16 .22 –.07 Required: (a) What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return % (b) What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).) Variance of a portfolio

I just need to understand Question 1 and 2. I just wanted to make sure I did the revenue management right.

Freedom Airlines recently started operations in the Southwest. The airline owns two airplanes, one based in Phoenix and the other in Denver. Each airplane has a coach section with 140 seats available. Each afternoon, the Phoenix based airplane flies to San Francisco with stopovers in Las Vegas and in San Diego. The Denver-based airplane also flies to San Francisco with stopovers in Las Vegas and in San Diego. Each airplane returns to its home-base with no stopovers.

Freedom Airlines uses two coach-fare classes: A discount fare (A) and a full fare (B). Discount fares are available with a 21-day advance purchase. Full fares applied at any time, up to the time of the flight.

Below is the daily fare and demand data for 16 selected Freedom Airline itineraries. Itineraries 1 through 6 apply to the Phoenix based airplane (leg 1); itineraries 7 through 12 apply to the Denver based airplane (leg 2); itineraries 13 and 14 apply to the Phoenix based airplane (leg 3); itineraries 15 and 16 apply to the Denver based airplane (leg 4):

1. Develop a revenue management (maximizing) model based on the information given in the scenario.
2. How many seats should be allocated to each of the 16 itineraries to maximize revenue?

You purchased a stock at a price of $48.74. The stock paid a dividend of $1.91 per share and the stock price at the end of the year is $54.79. What is the capital gains yield?

Use the following information to answer the next three questions.

Transactions between New Zealand and the rest of the world in 2018 are shown below.

1. New Zealand companies bought NZ$40 million worth of steel from US companies.
2. New Zealand's central bank sold NZ$25 million of treasury bonds to foreign investors.
3. New Zealand investors received NZ$2 million in interest payments from foreign investments.
4. New Zealand citizens purchased NZ$11 million worth of computers produced in Japan.
5. Americans spent NZ$20 million touring New Zealand.
6. JKL (New Zealand firm) purchased NZ$4 million in stock issued by a Brazilian firm.
7. The New Zealand central bank sold NZ$8 million worth of US dollars.

Find the capital account balance in terms of millions of New Zealand dollars.

Find the balance of trade in terms of millions of New Zealand dollars. Do not use currency symbols or words when entering your response.

Find the current account balance in terms of millions of New Zealand dollars.