In practice, Business Organizations need finance to operate and attain their strategic objectives. critically identify the various forms of business organizations and explain how each of them raises their finances. Please include references for your answe

Our company has been a very profitable company for many years. Currently, they are considering investing in a new project that will last three years. The project will require an immediate capital expenditure of $900,000 which will be fully expended this year as is now allowable under the new tax law. Our company estimates that the revenues from this project will be $500,000 during the first year and that the revenues will grow at a rate of 10% per year. Variable cost are expected to be 30% of revenues each year, and fixed cost are expected to be $15,000 per year. A one-time net working capital investment of $40,000 is required immediately and will be recovered at the end of the project’s life. Our company’s marginal tax is 21%. What is the IRR of this project?

6. You are building a free cash flow to the firm model. You expect sales to grow from $1 billion for the year that just ended to $2 billion five years from now. Assume that the company will not become any more or less efficient in the future. Use the following information to calculate the value of the equity on a per-share basis.

   1. Assume that the company currently has $300 million of net PP&E.

   2. The company currently has $100 million of net working capital.

   3. The company has operating margins of 10 percent and has an effective tax rate of

      28 percent.

   4. The company has a weighted average cost of capital of 9 percent. This is based on a

      capital structure of two-thirds equity and one-third debt.

(SHOW ALL OF WORK PLS)

Pfizer paid its stockholders a dividend of $5 per share yesterday. Today, the company announced that they plan to increase that dividend by $1.00 per share for each of the next three years. After that, they plan to keep their dividend at $8 per share forever. The variance of Pfizer’s stock is .09, the variance of the market is .04, and the correlation between Pfizer’s stock and the market is .05. The risk-free rate is 3% and the market-risk premium is 5.7%. Pfizer has $100 million shares of stock outstanding and $50 million of debt. The YTM for its is 8%. Use the dividend discount model to find the price per share of Pfizer’s stock.

uppose the following is the part of the WSJ listed options quotations on 12/1/2018; on that day IBN stock price was $53.

Strike	Exp.	Call	Put
50	Jan	5	1.06
50	Apr	3.50	1.25
55	Jan	6	5
60	Jan	0.50	8
60	Apr	1.50	9.50
60	Jul	2.38	10.75

Which one of the following is out of the money?

		50 Jan Call
		50 Apr Call
		55 Jan Call
		60 Jan Put

What is the exercise value, or the intrinsic (=parity) value of a Jan 50 call option?

		$1
		$2
		$3
		$4
		$5

How much time value is in Jan 50 call option?

		$1
		$2
		$3
		$4
		$5

Suppose today you buy a IBN Jan 50 call for the price listed. At expiration, IBN stock sells for $60. What is the profit per contract?

		$300
		$500
		$600
		$800
		$1200

Suppose you buy a IBN Apr 50 put for the price listed. At expiration, IBN stock sells for $45. What is your profit per contract?

		$150
		$250
		$375
		$400
		$550

Assume the call premium of $5 for IBN Jan 50 call option is right. Then the underlined price of $3.50 for Apr 50 call cannot be true. Which one of the following is a reasonable price for the option?

		$2.5
		$3
		$3.5
		$4.5
		$5.5

Assume the call premium of $5 for IBM Jan 50 call option is right. Then the underlined price of $6 for Jan 55 call cannot be true. Which one of the following is a reasonable price for the option?

		$0
		$1
		$6.5
		$7
		$7.5

ABD stock is selling for $145 and call option on ABD stock with striking price of $140 is selling for $12.5. The option expires 5 months from today. The risk-free interest rate is 8%. Based on the put-call parity for European options, calculate the value of put option with striking price of $140 and time to expiration of 5 months.

		$2.53
		$3.08
		$5.51
		$7.12
		$8.33

The current level of the S&P 500 is 1500. The dividend yield on the S&P 500 is 2%. The risk-free interest rate is 4%. The futures price for a contract on the S&P 500 due to expire 6 months from now should be __________.

		$1,500
		$1,515
		$1,525
		$1,535
		$1,545

XYZ Company has two good businesses. Each has an initial investment of $ 25,000 with each cash flow as follows:

Year	Business 1 Cash Flow	Business 2 Cash Flow
1	7,500	7,500
2	7,000	7,500
3	6,000	7,500
4	5,000	7,500
5	3,500	7,500

If the cost of capital is 12.5%, calculate:

A. Payback Period and NPV

B. In your opinion, which business is better chosen? Business 1 and Business 2? And Why?

1.         Individuals that are self-employed may participate in Financial Institution-administered retirement accounts that offering tax-deferred benefits. These are _________________.

A.     401(k)
B.      403(b)
C.      defined benefit plan
D.     Keogh account
E.      traditional IRA

2.         A(n) ______________ is an employer-offered supplemental retirement plan in which the employee chooses how funds are invested.

A.     401k plan
B.      defined benefit plan
C.      Roth IRA
D.     traditional IRA
E.      under-funded plan

3.         For an employee to retain her company’s pension benefits rights should she leave the firm, she must be _______________ .

A.     a defined contributor
B.      guaranteed
C.      insured
D.     invested
E.      vested

4.         If a pension plan sponsor promises an employee a specific schedule of benefits upon retirement, the plan is a(n) _______________.

A.     401k plan
B.      defined contribution plan
C.      defined benefit plan
D.     insured pension plan
E.      under-funded plan

5.         Key Federal legislation passed in 1974 concerning the administration of pension plans is the ____________ .

A.     ERISA
B.      Financial Services Modernization Act
C.      Keogh Act
D.     PBGC Act
E.      Roth Act

Yield to maturity:  

The bond shown in the following table pays interest

annually.

Par value	Coupon interest rate	Years to maturity	Current value	Copy to Clipboard + Open in Excel +
​$100100	77​%	1010	​$5050

a. Calculate the yield to maturity

​ (YTM​)

for the bond.

b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a​ bond? Explain.

a. The yield to maturity

​ (YTM​)

for the bond is

nothing ​%.

​ (Round to two decimal​ places.)

1. Construct a loan amortization schedule for a 15-year, 7.25% loan of $7,000,000. The loan requires equal, end-of-year payments, and interest is compounded monthly.

         
     -  What is the total amount of interest paid over the life of the  
         loan?

    
     2. Re-construct this amortization schedule assuming that                     
     interest is compounded annually.

  -  What total amount of interest is paid over the life of the loan?

  -  What is the difference between those total interest amounts?

3. Assume that in sections 1 and 2 above, there is a requirement to repay the whole remaining loan balance at the end of the tenth year, immediately after making the last equal payment.

What is the loan balance to be paid in section 1?

What is the loan balance to be paid in Section 2?

What is the difference between these amounts?

    

 B.-  1. Construct a loan amortization schedule for a $3,000,000, 3-year loan, made at
6.50% quoted annual rate. Interest is compounded daily, and the loan requires equal end-of-period monthly payments.(use 360-day year for computation) 

-    What is the total amount of interest paid on this loan?

Calculate the value of each of the bonds shown in the following​ table, all of which pay interest semiannually.  ​(Click on the icon located on the​ top-right corner of the data table below in order to copy its contents into a​ spreadsheet.)

Bond	Par Value		Coupon interest rate		Years to maturity		Required stated annual return		Copy to Clipboard + Open in Excel +
A	​$1 comma 0001,000		88	​%	1111		99	​%
B	500500		1212		2020		1111
C	100100		1414		44		1414

The value of bond A is

​$931.08931.08 .

​ (Round to the nearest​ cent.)The value of bond B is

​$nothing .

​(Round to the nearest​ cent.)

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 47%. The T-bill rate is 5%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. a. What is the expected return and standard deviation of your client's portfolio? (Round your answers to 2 decimal places.) Expected return % per year Standard deviation % per year b. Suppose your risky portfolio includes the following investments in the given proportions: Stock A 31% Stock B 31% Stock C 38% What are the investment proportions of your client’s overall portfolio, including the position in T-bills? (Round your answers to 2 decimal places.) Security Investment Proportions T-Bills % Stock A % Stock B % Stock C % c. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? (Round your answers to 4 decimal places.) Reward-to-Volatility Ratio Risky portfolio Client’s overall portfolio

Calculate the value of each of the bonds shown in the following​ table, all of which pay interest semiannually.  ​(

Bond	Par Value		Coupon interest rate		Years to maturity		Required stated annual return		Copy to Clipboard + Open in Excel +
A	​$1 comma 0001,000		88	​%	1111		99	​%
B	500500		1212		2020		1111
C	100100		1414		44		1414

The value of bond A is

​$nothing .

​ (Round to the nearest​ cent.)

Problem 5-13 Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 47%. The T-bill rate is 4%. Your risky portfolio includes the following investments in the given proportions: Stock A 31 % Stock B 31 % Stock C 38 % Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 10%. a. What is the proportion y? (Round your answer to 2 decimal places.) Proportion y b. What are your client's investment proportions in your three stocks and the T-bill fund? (Round your intermediate calculations and final answers to 2 decimal places.) Security Investment Proportions T-Bills % Stock A % Stock B % Stock C % c. What is the standard deviation of the rate of return on your client's portfolio? (Round your intermediate calculations and final answer to 2 decimal places.) Standard deviation % per year

Problem 5-18 You manage an equity fund with an expected risk premium of 13% and a standard deviation of 44%. The rate on Treasury bills is 6.6%. Your client chooses to invest $90,000 of her portfolio in your equity fund and $60,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client’s portfolio? (Round your answers to 2 decimal places.) Expected return % Standard deviation %

XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End 2010 $ 130 $ 5 2011 $ 144 $ 5 2012 $ 120 $ 5 2013 $ 125 $ 5 An investor buys six shares of XYZ at the beginning of 2010, buys another three shares at the beginning of 2011, sells one share at the beginning of 2012, and sells all eigth remaining shares at the beginning of 2013. a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Arithmetic mean % Geometric mean % b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2010, to January 1, 2013. (Negative amounts should be indicated by a minus sign.) Date Cash Flow 1/1/2010 $ 1/1/2011 1/1/2012 1/1/2013 b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.) (Negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Rate of return %