You believe that the likelihood that next year is a bull market year is 50%. You also believe that a bear market may occur with 20% likelihood. The following table contains information on the rates of return on various assets next year under various economic scenarios.

a) The capital allocation line is also called the capital market line, if the risky portfolio is the market portfolio. Write down the equation for the Capital Market Line using the information on the market portfolio in the table above.

b) What are the betas of security X and security Y? According to CAPM, are securities X and Y fairly priced? Explain.

As for the sales forecast for Year 1 through Year 3, these are some important variables I will go to consider for sales:

Economy: The economic condition of the city, the province and the country are variables I need to consider for a sales forecast. If conditions are poor, people will spend less money on consumption. If economic conditions are great, then more people will have extra money to spend.

Competition: I need to consider the level of competition I have around me. If new competitors enter the market, that can affect my sales forecast drastically. The same goes for if my competitors drop out of the market.

Inflation: Inflation is something that effects every country, and effects the economic conditions. So, I need to consider trends of inflation (and inflation forecasts) in order to make a sales forecast.

Political Environment: I need to consider the political environment of the city, the province and the country. The political environment affects the economy and business law. If there is an election within my sales forecast period, I need to consider the potential outcomes of each election.

Seasonal Demands: I need to consider seasonal demands and trends because each season has a different demand for products. Summertime is going to require cold beverages, meanwhile winter will have a demand for hot beverages. Each season will also affect overall sales. People spend more money in the summer. A sales forecast will have to consider all these seasonal demands and changes into the model.

Where to obtain data: Government websites, Market research firms, Political experts, Stock Market data, Google Maps (search for competitors) or Drive around my area (locate competitors visually), City database, Economic analysts

Part 1

1.Are these considerations feasible? Would you change or add any considerations?

2.As a lender (someone who commits capital with the expectation of receiving financial returns) to this company, what are some numbers you want this entrepreneur to show you before you make your decision to invest your money?

The biggest challenges throughout the planning process is determining start up costs, determining inventory and determining the location of the store. The start up costs are a big challenge due to there being a number of variables such as how much inventory is smart to start off with, how much to pay in utilities (can easily fluctuate), and how much to pay in advertising the store to customers. Determining inventory is also a challenge because orders must be placed to keep up with inventory and determining a schedule for that is based on revenue, but during the planning process revenue can only be projected and not consistently known. Determining the location of the store is also a challenge, it is an extremely important decision that will make or break the success of the store. Calculating how many customers are nearby, as well as type of income (lower-class, middle-class, upper class, etc.) is also challenging.

The growth potential of my business is tremendous. I view after a few months, for there to be a solid foundation for revenue. The first few months may be tough because the public either doesn’t know about the store, or don’t have a trust built with the store yet. Once I am established, I see my store serving the community with well needed convenience products and establishing a

casual customer base. Once I’m established after a few months, I expect revenue to climb and stabilize. After a few years I expect to be financially in a great position. Some profits can be diverted to upgrades for the store, improving customer experience (maybe experiment with new and diverse products). After a few years, I see myself expanding by buying other Circle K franchises to open or try to buy established stores from owners. This would require saving up a lot of the profit but in the long run it is a great investment in my opinion.

Part 2

3.This entrepreneur mentioned some big challenges he/she would face when starting this business. Do you agree? Explain your decision

4.Evaluate the growth potential of the business. Would you agree with this entrepreneur’s vision? Why or why not?

hello chegg, please provide references from where you pick the data to answer these questions

Acme Inc. manufactures widgets. This year was a great year with a increase in both sales and production volume. In addition, the cost per unit dropped significantly from the prior year. These facts (probably) imply that:

Suppose the inflation rate is expected to be 6% next year, 4.9% the following year, and 2.9% thereafter. Assume that the real risk-free rate, r*, will remain at 1.7% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds.

Calculate the interest rate on 1-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.%

Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.%

Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.%

Select the correct yield curve based on these data.

1. The correct sketch is -Select-ABCD .
2. 
   
3. 
   
4. 
   
5. Suppose a AAA-rated company (which is the highest bond rating a firm can have) had bonds with the same maturities as the Treasury bonds. Estimate what you believe a AAA-rated company's yield curve would look like on the same graph with the Treasury bond yield curve. (Hint: Think about the default risk premium on its long-term versus its short-term bonds.)
   
6. The yield risk curve for the AAA-rated corporate bonds will -Select-rise abovefall belowbe the same as the yield curve for the Treasury securities.
7. 
   
8. 
   
9. 
   
10. What will be the approximate yield curve of a much riskier lower-rated company with a much higher risk of defaulting on its bonds?
    
11. The yield risk curve of a much riskier lower-rated company will be -Select-abovebelowthe same as the yield curve for the Treasury securities and -Select-abovebelowthe same as the yield curve for the AAA-rated corporate bonds.
12. 
    
13. are you able to show how to calculate these out?
14. 
    

A 30-year loan of 1,000 is repaid with payments at the end of each year. Each of the first ten payments equals the amount of interest due. Each of the next ten payments equals 150% of the amount of interst due. Each of the last ten payments is X. The lender charges interest at an annual effective rate of 10%. Calculate X.

1 Suppose the value of the CPI is 1.26 in year one, 1.285 in year two and 1.298 in year three. Assume also that the price of computers increases by 4% between year one and year two, and by another 4% between year two and year three. Between year two and one, and year three and two, the price level is increasing, the inflation rate is _______, and the relative price of computers is _________. (Increase or decrease for the inflation rate and relative price?)

2 If the natural rate of unemployment equals 5% and the actual rate of unemployment equals 2%, then cyclical unemployment equals: ( )

3 Over the period of a year, Alex's nominal GDP decreases by 20% and real GDP decreases by 20%. This implies that, during this time:

The CPI has fallen by less than 20%.

The CPI has remained constant.

The CPI has fallen by more than 20%.

The CPI has risen by less than 20%

4.

Public saving is _____ and national saving is ______.

Ronnie, who is in the 33% tax bracket this year, expects to retire next year and be in the 25% tax bracket. He plans to donate $50,000 to his church. Because he will not have the case available until next year, Ronnie donates land (long term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December of the current year. He reacquires the land for $50,000 in February of next year. Discuss Ronnie's tax objectives and all tax issues related to his actions.

A bond has payments of $100 in one year, $100 the following year, and then $1,100 the year after that. If the discount rate is 6%, what is the Macaulay Duration of this set of payments?

Miller produces luxury water cooler. This is their first year in operation (starting the year with $0 balances). The company produced 10,000 units (started and completed) and sold 9,000 units for $570,000. Miller paid $12 per unit in direct materials and $7 per unit in wages for production workers. Lease payments and utilities on the production facilities amounted to $23,500 and selling & administrative expenses were $18,000. Answer the following questions about Miller.

A.  What is the cost per unit of a water cooler?

B. What is the gross margin per unit of a water cooler?

C. What is the balance in the inventory account before any water coolers were sold?

D. What is the cost of goods sold for the year?

E. What is the cost of inventory on the balance sheet at the end of the year?

F.  What is the net income for the year?

Blue Elk Manufacturing reported sales of $720,000 at the end of last year, but this year, sales are expected to grow by 8%. Blue Elk expects to maintain its current profit margin of 23% and dividend payout ratio of 10%. The following information was taken from Blue Elk’s balance sheet:

Based on the AFN equation, the firm’s AFN for the current year is _____ .

A positively signed AFN value represents:

a.A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends

b.A shortage of internally generated funds that must be raised outside the company to finance the company’s forecasted future growth

c.A point at which the funds generated within the firm equal the demands for funds to finance the firm’s future expected sales requirements

Because of its excess funds, Blue Elk Manufacturing is thinking about raising its dividend payout ratio to satisfy shareholders. Blue Elk could pay out____ % of its earnings to shareholders without needing to raise any external capital. (Hint: What can Blue Elk increase its dividend payout ratio to before the AFN becomes positive?)