A bank with a two-year horizon has issued a one-year certificate of deposit for $60 million at an interest rate of 2 percent. With the proceeds, the bank has purchased a two-year Treasury note that pays 4 percent interest.

What risk does the bank face in entering into these transactions?

Instructions: Enter numeric responses as whole dollar values.

The bank faces the risk that the short-term interest rate will  (Click to select)  fall  rise  before the second year,  (Click to select)  increasing  decreasing  the amount of interest the bank has to pay on the CD, but leaving the interest income that the bank receives from the Treasury note unchanged. With an interest rate of 2 percent for the CD and 4 percent for the Treasury note, the bank’s annual interest income is $  and the bank’s annual interest expenses are $  . The bank makes a profit of $  .  

What would happen if all interest rates were to rise by 1 percent?

If the interest rate rises 1 percent, the bank's profit in the second year falls to $  .

1. Suppose at time 0 you had $2500 in the bank and 21 years later you had $15650. Calculate the effective annual rate of return if the bank pays interest:

1. Continuously

The financial crisis compelled banks to reduce their leverage sharply.   Consider the following two views of the balance sheet of a bank before and after the financial crisis.

Calculate the leverage ratios for each view.

Instructions: Enter your responses rounded to two decimal places.

View 1: Leverage ratio =

View 2: Leverage ratio =

Which balance sheet view is more likely to be that of the bank after the financial crisis?

• View 2

• View 1

It is January 1 2020 and you have recently started a new company, Green- Drone, that produces flying drones for garden maintenance. You are stillat the product development stage but would like to evaluate the financial feasibility of the project. Here are some information about the company:

- R&D expenditures. In order to develop the drones, you need to hire an engineer for 5 years at an annual salary of $96,000. The salary is paid monthly at the end of the month in equal amounts, i.e. 96,000/12 per month for the rst year. To stay competitive, you expect you will have to grow the annual salary at a rate of 3%, starting the next year. The engineer contract starts today, i.e., onJanuary 1 2020.
- Production cost. Once the product is developed in 5 years (January 1 2025), you will start the production of your drones. Each product is expected to cost $265 to produce. The cost is to be paid to the supplier at the beginning of a month.
- Pricing and sales. You plan to sell the drones for $325 a unit over the next three years, i.e., until January 1 2028. All sales for products produced in a month are collected at the end of the month. The appropriate discount rate r is 5%, annually compounded. Denoting the quantity of drones sold in a month by Q. How many drones do you need to sell per month to make this project protable (i.e., generate a positive NPV)?

ABC, Inc is considering launching a new product which incurred $2.5 million in Research and Development expenses over the last year. The company will spend $1.8 million to acquire the equipment necessary for the manufacture of the new product. The equipment will last for 15 years and have a salvage value of $35,000. It will be depreciated to zero over 10 years using straight line depreciation. The company will also have an increase of $250,000 in accounts receivable and a decrease of $75,000 in accounts payable. The company anticipates to produce 100,000 units every year for the next 15 years and sell the units for $4 per unit. The variable costs are $0.25 per unit and the annual fixed costs are projected to be $10,000 per year. The company has a target capital structure of 40% debt and 60% equity. The company’s outstanding bonds have a yield to maturity of 5.5% and the company’s tax rate is 30%. The company has a beta of 1.4, the risk free rate is 2% and the market risk premium is 6%. Please answer the questions below and show all the formulae you used and all the calculations. (show work)

1) What is the project’s cash flow at time 0?

2) What is the after tax operating cash flow in years 1 through 10?

3) What is the after tax operating cash flow in years 11 through 14?

4) What is the after tax cash flow in year 15?

5) What is the company’s cost of equity?

6) What is the company’s WACC?

7) What is the NPV of the project?

8) What is the IRR of the project?

9) What is the profitability index?

10) Should the company launch the new product?

Assume sales for Peach Street Industries are expected to increase by 7.00% from 2015 to 2016. Peach Street is operating at full capacity currently and expected assets-to-sales and spontaneous liabilities-to-sales to remain the same. Additionally, the firm is looking to maintain their 2015 net profit margin and dividend payout ratios for 2016. The firm’s tax rate is 36.00% and selected income statement and balance sheet information for 2015 is provided below:

what is the firm's payout ratio?

what is the firm's net income for 2015?

How much in additional funds (external capital) will Peach Street Industries need in 2016 to support their projected growth in sales? (i.e., calculate the firm’s additional funds needed --AFN)

The firm is projecting sales growth of 10% from 2015 to 2016. If the firm did not have access to or did not want to use external capital sources to grow sales, what is the maximum rate of sales growth (self-sustaining growth rate) could the firm could achieve under these conditions?

Your company has been doing​ well, reaching $ 1.08 million in​ earnings, and is considering launching a new product. Designing the new product has already cost $ 471,000. The company estimates that it will sell 777,000 units per year for  $ 2.92 per unit and variable​ non-labor costs will be $ 1.15 per unit. Production will end after year 3. New equipment costing  $ 1.11 million will be required. The equipment will be depreciated using​ 100% bonus depreciation under the 2017 TCJA. You think the equipment will be obsolete at the end of year 3 and plan to scrap it. Your current level of working capital is $ 308,000. The new product will require the working capital to increase to a level of $ 377,000 ​immediately, then to $ 396,000 in year​ 1, in year 2 the level will be $ 359,000​, and finally in year 3 the level will return to $ 308,000. Your tax rate is 21 %. The discount rate for this project is 10.4 %. Do the capital budgeting analysis for this project and calculate its NPV. Note​: Assume that the equipment is put into use in year 1. Design already happened and is BLANK ​(irrelevant).  ​(Select from the​ drop-down menu.) According to the bonus depreciation​ schedule, depreciation in year 1 will be ​$ ___. ​ (Round to the nearest​ dollar.) Depreciation in years 2 and 3 will be ​$___. ​(Round to the nearest​ dollar.) Complete the capital budgeting analysis for this project​ below:  ​(Round to the nearest​ dollar.) Year 0, 1, 2, & 3 need the following information: Sales $ ___Cost of Goods Sold $____ Gross Profit $____ - Depreciation $____ EBIT $____ - Tax $ ____Incremental Earnings $ ____+ Depreciation $ ____- Incremental Working Capital $ _____- Capital Investment $ ____Incremental Free Cash Flow $____ Year 1 $ ____Year 2 $ ____ Year 3 $ )____ The NPV of the project is ​$_____. ​(Round to the nearest​ dollar.) Enter any number in the edit fields and then continue to the next question.

There have been many studies over time debating the efficiency of the stock market and just how much information is embedded within the stock price.. In your opinion which form of the efficient market hypothesis do you believe the financial markets behave like?

1. A company currently pays a dividend of $4 per share (D₀ = $4). It is estimated that the company's dividend will grow at a rate of 24% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 0.85, the risk-free rate is 3.5%, and the market risk premium is 6%. What is your estimate of the stock's current price? Round your answer to the nearest cent.

2. A stock is trading at $40 per share. The stock is expected to have a year-end dividend of $2 per share (D₁ = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 11% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g? Round the answer to three decimal places.

3. Crisp Cookware's common stock is expected to pay a dividend of $3 a share at the end of this year (D₁ = $00); its beta is 1.20; the risk-free rate is 5.2%; and the market risk premium is 4%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $46 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years (i.e., what is P3 )? Do not round intermediate steps. Round your answer to the nearest cent.

First, I want you to think about your retirement portfolio, and make a contribution to discussion based on the following questions:

• Is it easy or difficult to estimate the risk of your overall portfolio? Have you calculated the standard deviation of your investment portfolio?
• Without giving details of your exact allocation, do you own now more stocks than bonds? How frequent do you adjust (rebalance) your portfolio? If you were going to make some changes now, do you think you need to increase your allocation to bonds? Stocks? Riskier securities or safer ones?
• Do you buy directly stocks or you invest in mutual funds? Index or active mutual funds? An index fund is a fund whose return depends on an index (i.e. S&P 500). An active fund's allocation is decided by a manager that decides what to buy or sale.

1.Find the following values, using the equations, and then work the problems using a financial calculator to check your answers. Disregard rounding differences. (Hint: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.)

a. An initial $400 compounded for 1 year at 8.8%. Round your answers to the nearest cent.
$  
b.An initial $400 compounded for 2 years at 8.8%. Round your answers to the nearest cent.
$  
c.The present value of $400 due in 1 year at a discount rate of 8.8%. Round your answers to the nearest cent.
$  

d..The present value of $400 due in 2 years at a discount rate of 8.8%. Round your answers to the nearest cent.
$  

2. Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.)

a $200 per year for 10 years at 8%.
$  
b. $100 per year for 5 years at 4%.
$  
c. $200 per year for 5 years at 0%.
$  

Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

d. $200 per year for 10 years at 8%.
$  
e. $100 per year for 5 years at 4%.
$  
f. $200 per year for 5 years at 0%.
$  

You are long 24 gold futures contracts, established at an initial settle price of $864 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract, and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $853, $849, $859, and $869, respectively. Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit or loss at the end of the trading period. Assume that a margin call requires you to fund your account back to the initial margin requirement. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

In the new environment, which two of Porter's five forces are critical to NYT?

Analyze them, and suggest what NYT must do to manage those forces.

Use the following set of cash flows for the questions below:

           
2.

1. Using the cash flows in Table A, determine the present value of the cash flow stream at the following discount rates: 3%, 8%, 12%, 18%, and 22%. (Use a data table to complete these calculations. (please show how to do in excel, having a hard time figuring out how to use the data table to find answers.)