0. After a detailed analysis on the risks and returns of the stock market and Stock XYZ (current price=€50), you conclude that the price of XYZ is unlikely to change a lot during the course of the next 3 months. You decide to bet on this analysis and establish a short straddle position, by simultaneously writing 100 puts and 100 calls with maturity of 3 months and a strike price of €50. The premium you receive for writing each put/call is €2.50.

   •  What is the maximum profit of your position? What should the stock price be, in order to realize this maximum gain?

   •  Report the lower and higher bounds for XYZ’s price 3 months from now that provide you with a non-negative return on your position.

   •  Draw a profit diagram separately for your a) short position on puts, b) short position on calls, and c) total position

ToylandToyland Products is considering producing toy action figures and sandbox toys. The products require different specialized​ machines, each costing ​$11 million. Each machine has a​ five-year life and zero residual value. The two products have different patterns of predicted net cash​ inflows:

ToylandToyland

will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds​ 8%.

Calculate the toy action figure​ project's payback period. If the toy action figure project had a residual value of $ 100 comma 000$100,000​, would the payback period​ change? Explain and recalculate if necessary. Does this investment pass ToylandToyland​'s payback period screening​ rule?

Calculate the toy action figure​ project's payback period.

First enter the​ formula, then calculate the payback period. ​(Enter amounts in​ dollars, not millions. Round your answer

Identify the types and sources of bank risk and explain how to control them.

1. Position yourself as a potential investor in an early stage IT company. Clearly articulate and explain three (3) key considerations that would need to be sufficiently addressed / resolved prior to closing an investment. Explain why these items are so important.

1. Compare and contrast angel investors, venture capitalists and angel networks. Provide examples of optimal investment profiles for each investor group.

     Brower, Inc. just constructed a manufacturing plant in Ghana. The construction cost 9 billion Ghanian cedi. Brower intends to leave the plant open for three years. During the three years of operation, cedi cash flows are expected to be 3 billion cedi, 3 billion cedi, and 2 billion cedi, respectively. Operating cash flows will begin one year from today and are remitted back to the parent at the end of each year. At the end of the third year, Brower expects to sell the plant for 5 billion cedi. Brower has a required rate of return of 17 percent. It currently takes 8,700 cedi to buy one U.S. dollar, and the cedi is expected to depreciate by 5 percent per year.

a.          Determine the NPV for this project. Should Brower build the plant

b. b.   How would your answer change if the value of the cedi was expected to remain unchanged from its current value of 8,700 cedis per U.S. dollar over the course of the three years? Should Brower construct the plant then?

Please show how to solve without using excel, thank you.

6. Assume you have just been hired as a business manager of Bernie’s Burgers, a regional hamburger restaurant chain. The company’s EBIT was $150 million last year and is not expected to grow. The firm is currently financed with all equity and it has 10 million shares outstanding. When you took your corporate finance course, your instructor stated that most firm’s owners would be financially better off if the firms used some debt. When you suggested this to your new boss, he encouraged you to pursue the idea. As a first step, assume that you obtained from the firm’s investment banker the following estimated costs of debt for the firm at different capital structures:

                                                   % Financed With Debt            r_d            

                                                               0%                              ---      

                                                              25                                 8.0%     

                                                              33                                 8.5      

                                                              45                                10.0      

                                                              55                               12.0      

If the company were to recapitalize, debt would be issued, and the funds received would be used to repurchase stock. Bernie’s Burgers is in the 28 percent state-plus-federal corporate tax bracket, its beta is 1.27, the risk-free rate is 6 percent, and the expected return on the market is 11 percent.

1. Calculate the leveraged beta for each capital structure.

        b.Calculate the cost of capital for each capital structure.

Gutierrez & Ravenna Company has just paid a dividend of D0 = $2.00. Due to a new product, Gutierrez & Ravenna expects its short-run growth rate in dividends to equal 20 percent annually for the next 3 years. After this time, growth is expected to return to the long-run constant rate of 5 percent. The required rate of return on the company’s equity is 12%. What should the dividend yield (D1/P0) be today? [Hint: Find the price (P0) today prior to computing the dividend yield (D1/P0)]

a. 5.48%

b. 5.05%

c. 4.57%

d. 6.06%

e. None of the above

Please choose the MOST correct alternative.

a. If the discount rate used for a project with normal cash flows is equal to its IRR, then the PI = 1.

b. The NPV of a project is equal to zero when the discount rate used is the IRR.

c. For a project with normal cash flows, the PI will always be greater than 1 if the NPV is positive.

d. The decision regarding acceptance / rejection of a project should be based on the NPV criterion.

e. All of the above are correct.

Describe a commercial bank's assets and liabilities.

1. Compare both projects using NPV if the cost of capital is 10%.
2. Compare each project using the IRR approach.
3. Now compare both projects using the equivalent annual annuity (EAA) method.
4. Compare each project using the replication approach.

See Income Statement:

If the project costs $2,000,000, lasts for 6 years and the cost of capital is 15%, compute the NPV and IRR for the project.

Jalal, Inc. needs to raise $50,000,000 by selling bonds. The bonds have a par value of $1,000, pay coupon interest semi-annually, have an annual coupon rate of 6%, and mature in 20 years. The bond’s default risk-premium (DRP) is 2%, its maturity risk-premium (MRP) is 1%, and its liquidity risk-premium (LRP) is 2%. Further, the risk-free rate of return is 3%

What is the required rate of return on Jalal’s debt?

a. 5%

b. 9%

c. 8%

d. 3%

e. None of the above

How many bonds will Jalal, Inc. have to sell to raise the needed funds (round to the nearest whole number)? [Hint: Compute the price of each bond first. For simplicity, assume that the required rate of return you computed in Question 4 is a stated annual rate compounded semiannually. The number of bonds Jalal, Inc. will need to issue will then equal the amount of capital it wants to raise divided by the price it expects to get for each bond that it sells.]

a. 44,424 bonds

b. 69,063 bonds

c. 123,833 bonds

d. 62,339 bonds

e. None of the above