1. Why should stockholders care about maximizing firm value rather than just the value of the equity?
2. How does financial leverage affect firm value and weighted average cost of capita (WACC) without taxes? With taxes? With Bankruptcy cost?
3. Explain the tradeoff, signaling, agency cost, and pecking order theoriesof capital structure.
4. Explain why share repurchases are an alternative to dividends, and why mightinvestors prefer them?

Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%. What is the price of the stock today (P0)?

Ana has bought shares of RIO, Inc. stock for $25.00 per share. She expects a 1.00 dividend at the end of this year. After 2 years, she expects to receive a dividend of $1.25 and to sell the stock for $28.75. What is Ivonne's required rate of return? (I will not be using Excel for this problem, please show me how to do it with a calculator --show formula if possible

Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $2 million, $5 million, $10 million, and $13 million. After the fourth year, free cash flow is projected to grow at a constant 8%. Brandtly's WACC is 11%, the market value of its debt and preferred stock totals $52 million, the firm has $15 million in non-operating assets, and it has 22 million shares of common stock outstanding.

1. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
   $  
2. 
   
3. What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
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4. 
   
5. What is the market value of the company's operations? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
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   What is the firm's total market value today? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
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6. 
   
7. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent.
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1. Suppose there are two bonds for sale; Bond A with 7-years to maturity, paying a semi-annual interest payment of $57.75, and available for purchase at $1,017.63; and a second bond for sale at $989.54, maturing in 5-years, and paying $63.65 on a semi-annual basis. What is the YTM of the two bonds? And which one will you add to your portfolio based on the highest yield to maturity?

2. Given the following cashflows, calculate both the NPV and the IRR for a project with a 7% cost of capital.

Initial Outlay = $100,000

Year 1 = $50,000

Year 2 = $40,000

Year 3 = $30,000

Year 4 = $10,000

Assume that the current spot rates are as follows:

1 Years 8% Spot

2 Years 9% Spot

3 Years 10% Spot

If the unbiased expectations theory holds, what should be the yields-to-maturity on one and two year pure discount bonds one year from today?

Shanken Corp. issued a 30-year, 5.9 percent semiannual bond
three years ago. The bond currently sells for 106 percent of its face value. The company's tax rate is 22 percent.
a. What is the pretax cost of debt?
b. What is the aftertax cost of debt?
c. Which is more relevant, the pretax or the aftertax cost of debt? Why?

Calculating Cost of Debt.
For the firm in the previous problem, suppose the book value
of the debt issue is $25 million. In addition, the company has a second debt issue on the market, a zero coupon bond with nine years left to maturity; the book value of this issue is $60 million and the bonds sell for 68 percent of par. What is the company's total book value of debt? The total market value? What is your best estimate of the aftertax cost of debt now?

Madsen Motors's bonds have 21 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 8.5%; and the yield to maturity is 11%. What is the bond's current market price? Round your answer to the nearest cent. $

You are working for an active investment group, which is very interested in an office property in Tokyo. The property is 16 years old, well (but not spectacularly) located, with good floor plates, and meets earthquake standards.  

The property is available for $100 million (all payments will be in yen, but I’ll express them in dollars to ease your headaches), which is a mere 20% of the value placed on the property in 1991. The property needs about $20 million in improvements to make it competitive with new properties. The property is currently vacant, as it was the headquarters of a recently liquidated bankrupt company. At the all-in-cost of $120 million the property would have a cost equal to roughly 90% replacement cost, though since land costs are 50-60% of replacement costs, and land prices continue to fall, it is hard to be precise on this estimate.

The local rental market for quality properties is fairly strong in spite of the weak Japanese economy, as tenants continue to take advantage of low rents by moving out of poorly located and designed properties into better properties. Leases in Tokyo are only two years in duration, and the tenant typically pays triple net rents. Property values are at levels not seen since the early 1980s. Sales are relatively frequent, but pricing is unpredictable, with American buyers paying 6-8% cap rates, and occasionally Japanese firms paying 3-5% cap rates. Two REITs recently did IPOs at roughly 6% cap rates, but their prices have fallen substantially since their IPOs.

Rents in Tokyo for quality properties continue to fall by 1-2% per year, as new construction continues to generate a modest supply/demand imbalance. This situation, and the general Japanese economic malaise, is expected to continue for the next several years.

You believe that after one year to completing the necessary improvements, you will be able to lease the property for an NOI of $8.4 million (after usual reserves). You can borrow $100 million, non-recourse, 5-year maturity, no points, 30-year amortization, for a fixed interest rate of 2%. To eliminate all currency risks on your investment (let’s not worry about how this is done) will cost $1.2 million per year. Your target rate of return is roughly 17% on your equity for a 5-year hold. What do think (and why)?

React: Debt always enhances the returns on equity because the borrowing rate is lower than the cash yield and properties go up in value.

Nestle can raise equity capital in its domestic equity market, or in the global equity markets.  Nestle's equity beta in the domestic market is 1.20.  In the global equity markets, which have a higher expected return, Nestle has a lower beta of 0.90. The risk-free rate in either the domestic or global securities market is 3.0%, while the domestic market has an expected market return of 11% and the global market has an expected return of 13.0%.

a)      Calculate Nestle's cost of Equity for both portfolio data sets

b)   If Nestle's debt/total capitalization ratio increases from 35% to 45%, given its cost of debt of 6.5% and its tax rate of 20%, calculate the WACC for each portfolio set before and after the change in capital structure.

React to each of the following questions.

A mortgage is more valuable as part of a CMBS offering than as a non-securitized mortgage.

Asset valuation and risk  Personal Finance Problem   Laura Drake wishes to estimate the value of an asset expected to provide cash inflows of $1,800 for each of the next 4 years and ​$8,710 in 5 years. Her research indicates that she must earn 4​% on​ low-risk assets, 8​% on​ average-risk assets, and 14​% on​ high-risk assets. a.  Determine what is the most Laura should pay for the asset if it is classified as​ (1) low-risk,​ (2) average-risk, and​ (3) high-risk. b.  Suppose Laura is unable to assess the risk of the asset and wants to be certain​ she's making a good deal. On the basis of your findings in part a​, what is the most she should​ pay? Why? c. All else being the​ same, what effect does increasing risk have on the value of an​ asset? Explain in light of your findings in part a.

David Palmer identified the following bonds for investment:

1. Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025.
2. Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031.
3. Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026.

The three bonds were issued on July 1, 2011.

(Each Part is Independent)

2. David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (from another investment account), calculate the current yield, capital gain yield and the 2-year total rate of return (HPY) on investment for David on January 1, 2016. [Hint: Be careful with how many rounds of coupons has David received during the holding period and thus how much interests (coupons and reinvestment of coupons) he has earned in total during the 2-year holding period.]                                                                                                                           

Please provide steps thanks

Why do we have to use computers for algorithmic trading? what are the advantages and disadvantages of algorithmic trading? explain in detail