if I were to tell you that a stock hs a significantly positive alpha but and extremely high beta, is this still stock a good one to own ? why or why not?

1. You are shown the following data. If the correlation coefficient between the combined portfolio of A+B and C is 0.2, what would happen to the overall volatility of the new portfolio if we invested 50% in A+B and the remaining 50% in C? You could potentially avoid computations.

1. Volatility will lie somewhere between 32% and 40%.
2. Volatility will lie somewhere between 27% and 32%.
3. Volatility will be below 27%.
4. Volatility will be above 40%.
5. Volatility will become zero.

Explain how agency conflicts arise in an organization. What are the appropriate solutions to reduce agency costs? Cite appropriate examples from Saudi Firms. 

Angie Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent.  If the company purchases the equipment for $2,000,000 it will depreciate it over 4 years, using straight-line depreciation. No salvage value is expected.  If the company enters into a 4-year lease, the lease payment is $600,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an interest rate of 10 percent.  

Calculate the cost of purchasing the equipment.

Assume that the United States invests heavily in government and corporate securities of South Korea (hereafter, ‘Korea’). In addition, residents of Korea invest heavily in the United States. Approximately $20 billion worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $15 million. This information is expected to also hold in the future. Explain how each of the following conditions will affect the value of Korean currency, won, holding other things equal. a) U.S. inflation has suddenly increased substantially, while Korean inflation remains low. b)U.S. interest rates have increased substantially, while Korean interest rates remain low. Investors of both countries are attracted to high interest rates. c) The U.S. income level increased substantially, while Korean income level has remained unchanged d) The U.S. is expected to impose a small tariff on goods imported from Korea. e) Combine all expected impacts to develop an overall forecast.

The Marcus Company is evaluating the proposed acquisition of a new  machine. The machine's base price is $350,000, and it would cost another $125,000 to modify it for special use.  The machine falls into the MACRS 3-year class, and it would be sold after 4 years for $40,000.  The machine would require an increase in net working capital of $20,000. The machine would have no effect on revenues, but it is expected to save the firm $170,000 per year for 4 years in before-tax operating costs. .  The company's marginal tax rate is 30 percent and its cost of capital is 10 percent.

Calculate NPV. Should the machinery be purchased? Why or why not?

Calculation of individual costs and WACC: Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following​ weights:50​% long-term debt, 20% preferred​ stock, and 30% common stock equity​ (retained earnings, new common​ stock, or​ both). The​ firm's tax rate is 28​%.

Debt: The firm can sell for ​$1010 a 12​-year, ​$1000​-par-value bond paying annual interest at a 8.00​% coupon rate. A flotation cost of 2​% of the par value is required.

Preferred stock: 8.00% ​(annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of ​$2 per share must be paid to the underwriters.

Common stock: The​ firm's common stock is currently selling for ​$60 per share. The stock has paid a dividend that has gradually increased for many​ years, rising from $2.70 ten years ago to the $4.00 dividend​ payment, Upper D 0, that the company just recently made. If the company wants to issue new new common​ stock, it will sell them ​$3.50below the current market price to attract​ investors, and the company will pay ​$2.50 per share in flotation costs.  

a.  Calculate the​ after-tax cost of debt.

b.  Calculate the cost of preferred stock.

c.  Calculate the cost of common stock​ (both retained earnings and new common​ stock).

d.  Calculate the WACC for Dillon Labs.

Shown below are exchange rates for several currencies.  

A U.S. company purchases goods from several foreign companies with payment due in euros, francs, and pesos.  Would the company be better off paying any of the suppliers now or should it wait 60 days? Why?

Angie Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent.  If the company purchases the equipment for $2,000,000 it will depreciate it over 4 years, using straight-line depreciation. No salvage value is expected.  If the company enters into a 4-year lease, the lease payment is $600,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an interest rate of 10 percent.  

Calculate the cost of leasing the equipment.

You are scheduled to receive annual payments of $8,600 for each of the next 27 years. The discount rate is 7.0 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?

Greentop Inc. plans on increasing its annual dividend by 15 percent a year for the next four years and then decreasing the growth rate to 2.5 percent per year. The company just paid its annual dividend in the amount of $.20 per share. The required rate of return is 17.4 percent.

(a) What is the current value of one share of this stock?

(b) What is the expected stock price of this stock for next year?

(c) What is the expected stock price of this stock in 10 years?

I need explanation. thanks!

Assume Nike is exposed to a currency portfolio weighted 50 percent in Canadian dollars and 50 percent in Mexican pesos. Nike estimates the standard deviation of quarterly percentage changes to be 4 percent for the Canadian dollar and 6 percent for the Mexican peso. Also assume that Nike estimates a correlation coefficient of 0.2 between these two currencies.
a) Calculate the portfolio’s standard deviation.
b) Assuming i) normal distribution of the quarterly percentage changes of each currency (and so the same of the portfolio as well), and ii) an expected percentage change of -1 percent for the currency portfolio, calculate the maximum one-quarter loss of the currency portfolio based on a 95 percent confidence level.

Currently the level of the S&P 500 Index is 1300, and the yield on the 90-day treasury bill is 2.75%. The following table lists the forecasts of an economist for the S&P 500 in the coming year.

Calculate the expected return and standard deviation for the S&P 500. Construct the Security Market Line graph (from your findings) and show what the market risk premium is. Label your graph to receive full credit.

What would happen to the expected return on stocks if investors perceived an increase in the volatility of stocks? Why?

ATT is considering a project. The project requires to purchase an equipment with a cost of $1.55 million. The equipment will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project it will be sold for a market value of $240,000. The project will not change sales but will reduce operating costs by $399,000 per year. The project also requires an initial investment of $52,000 in net working capital, which will be recouped when the project ends. The tax rate is 34 percent.

(1) What is the cash flow of the project in year 0 (or at the beginning of the project)?

(2) What is the cash flow of the project in each year from year1 to year 8?

(3) What is the cash flow of the project in year 9 (or the ending year)? [hint: there are 3 cash flow items, for example after-tax salvage value]

(4) What is the project's NPV if the required return is 11.5 percent? [hint: the answer for NPV value is one of the following choices:] A. $215,433 B. $276,945 C. $268,011 D. $225,225 E. $257,703