Consider the following time series data.

Consider the following time series data.

Consider the following time series data.

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(a)  Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise.

If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) If the constant is "1" it must be entered in the box. Do not round intermediate calculation.

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(b) Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part (b) to capture seasonal effects and create a variable t such that t = 1 for Quarter 1 in Year 1, t = 2 for Quarter 2 in Year 1,… t = 12 for Quarter 4 in Year 3.

If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)

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(c)  Is the model you developed in part (b) or the model you developed in part (d) more effective?

QUESTION 14

[Q14-17] Your firm has a free cash flow of $300 at year 1, $360 at year 2, and $864 at year 3. After three years, the firm will cease to exist. As of today (i.e. at year 0), the firm is partially financed with a 1-year maturity debt, whose face value is $660 and interest rate is 10%. After the debt matures at year 1, the firm will not issue any more debt and will remain unlevered. Assume that the firm’s unlevered cost of capital is 20%, and the firm’s cost of debt is identical to the interest rate on the debt (i.e. 10%). The corporate tax rate is 40%.

What is the firm’s enterprise value if the firm were unlevered?

QUESTION 15

What is the discount rate for the interest tax shield?

QUESTION 16

What is the present value of the interest tax shield?

QUESTION 17

What is the firm’s enterprise value?

Please help solve above questions and show work.

Consider the following time series data.

Quarter Year 1 Year 2 Year 3

1 4 6 7

2 2 3 6

3 3 5 6

4 5 7 8

1.plot with line dot chart.

2.What type of pattern exists in the data?

a.Upward Trend Patter,

b. Downward Trend Pattern

c. Horizontal Pattern With Seasonality.

3.Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise. If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)

a. Value = ( )  + ( ) Qtr1 + ( )  Qtr2 + ( ) Qtr3 +  t

4.Compute the quarterly forecasts for next year. If required, round your answers to two decimal places.

1. Quarter 1 forecast =
2. Quarter 2 forecast =
3. Quarter 3 forecast =
4. Quarter 4 forecast =

4. Consider the following time series:

a. Construct a time-series plot. What type of pattern exists in the data? Is there an indication of a seasonal pattern? (10 points)

b. Use multiple linear regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if quarter 1, 0 else; Qtr2 = 1 if quarter 2, 0 else; Qtr3 = 1 if quarter 3, 0 else. (20 points)

c. Compute the quarterly forecasts for next year. (10 points)

1. Given the following government bond yields: one-year, 2% and four-year, 9.5%. What is the two-year government bond yield one would linearly interpolate from this information?

2. A 15 year coupon bond, that makes payments annually, has a coupon rate of 5%. The market discount rate on the bond is 8%. If interest rates were to rise by 100 bps today, how long would it take before the reinvested coupon payments offset the capital loss?

3. Yield spreads are often calculated as the difference between the interest rate on a risky bond and the interest rate on:

4. A fixed income analyst is likely to conduct an independent analysis of the credit risk because credit rating agencies:
   1. Often lag the market in pricing credit risk
   2. Rating agencies may make mistakes
   3. Some risks are difficult to capture in credit ratings
   4. All of the above.

5. Investment Grade bonds are rated _______/______ or higher by Moody’s/S&P. (Looking for the definition here, not just a true statement)

LO 2) Aston Corporation performs year-end planning in November of each year before its calendar year ends in December. The preliminary estimated net income is $3 million. The CFO, Rita Warren, meets with the company president, J. B. Aston, to review the projected numbers. She presents the following projected information.

Estimated fair value at December 31, 2017:

Other information at December 31, 2017:

The corporation has never used robotic equipment before, and Warren assumed an accelerated method because of the rapidly changing technology in robotic equipment. The company normally uses straight-line depreciation for production equipment.

Aston explains to Warren that it is important for the corporation to show a $7,000,000 income before taxes because Aston receives a $1,000,000 bonus if the income before taxes and bonus reaches $7,000,000. Aston also does not want the company to pay more than $3,000,000 in income taxes to the government.

Instructions

(a)  

What can Warren do within GAAP to accommodate the president's wishes to achieve $7,000,000 in income before taxes and bonus? Present the revised income statement based on your decision.

(b)  

Are the actions ethical? Who are the stakeholders in this decision, and what effect do Warren's actions have on their interests?

LO 2) Aston Corporation performs year-end planning in November of each year before its calendar year ends in December. The preliminary estimated net income is $3 million. The CFO, Rita Warren, meets with the company president, J. B. Aston, to review the projected numbers. She presents the following projected information.

Estimated fair value at December 31, 2017:

Other information at December 31, 2017:

The corporation has never used robotic equipment before, and Warren assumed an accelerated method because of the rapidly changing technology in robotic equipment. The company normally uses straight-line depreciation for production equipment.

Aston explains to Warren that it is important for the corporation to show a $7,000,000 income before taxes because Aston receives a $1,000,000 bonus if the income before taxes and bonus reaches $7,000,000. Aston also does not want the company to pay more than $3,000,000 in income taxes to the government.

Instructions

(a)  

What can Warren do within GAAP to accommodate the president's wishes to achieve $7,000,000 in income before taxes and bonus? Present the revised income statement based on your decision.

(b)  

Are the actions ethical? Who are the stakeholders in this decision, and what effect do Warren's actions have on their interests?