Gnomes R Us is considering a new project. The company has a debt-equity ratio of .78. The company’s cost of equity is 14.6 percent, and the aftertax cost of debt is 7.9 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. What discount rate should the firm use for the project?
In: Finance
It’s All in the Family
What company wouldn’t want a “leg up” in obtaining contracts for
lucrative new business? Seeking to gain an advantage in the
competitive world of investment banking led J.P. Morgan Chase &
Company officials to seek out and hire the children of prominent
Chinese officials. The individuals hired may have had the knowledge
or skills needed to fulfill the jobs for which they were hired. But
their most valuable qualification was something in their
genes—being related to an influential member of the political or
business elite in China. Having a connection to someone with
decision-making authority to grant business opportunities to J.P.
Morgan might have been the distinct factor that resulted in them
getting the job.
The purposeful targeting of well-connected sons and daughters with
the express purpose of driving business contracts might be
considered bribery under federal law. The U.S. Justice Department
has launched an investigation to determine if these hiring
decisions violate the Foreign Corrupt Practices Act. In fact, the
chief executive of J.P. Morgan’s China operations has voluntarily
resigned. J.P. Morgan isn’t alone in using such a practice.
Citigroup, Goldman Sachs, Morgan Stanley, UBS, and others are also
said to have done so.
Company executives at J.P. Morgan were aware of the program as well
as broad anticorruption measures several years before the
Securities and Exchange Commission began its investigation.
Claiming that this preferential hiring is “the norm of business” in
China, J.P. Morgan’s top leaders believe they acted according to
accepted standards. J.P. Morgan’s business acquisition in China did
indeed improve after it launched the selective hiring
program.
The bank developed a spreadsheet detailing potential recruits along
with their “valued” connections or business-enhancing prospects.
They also created a special internship to accommodate some
applicants who were screened less stringently than other job
applicants. So, the candidates were given particular attention and
a smooth path to employment. Government officials aren’t stating
that the employees are not qualified. They are more interested in
the reason each was selected from the applicant pool. A finding
that any of the banks involved intentionally hired the sons and
daughters to win business might result in bribery charges.
The banks are scrutinizing their hiring practices as they respond
to the government investigators’ inquiries. This practice
highlights differences in cultures, norms, and laws among nations.
What might be considered an expected and completely acceptable
practice in China might be deemed illegal—or at very least,
unethical—in the United States.
J.P. Morgan Chase & Company wanted to hire the children of prominent Chinese officials. Considering legal and ethical standards for hiring in the United States, which of the following questions would be most appropriate for an interviewer in the United States to ask during a structured interview to explore an applicant's family connections?
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Which of the following selection factors for global employees did J.P. Morgan Chase & Company consider when hiring personnel with political connections in China?
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Which of the following steps in the hiring process would most likely reveal an applicant's family political connections to J.P. Morgan Chase & Company?
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In: Operations Management
You invested in Facebook, and you're a diversified investors. Which of the following risks concern you the most?
a.
The risk that a global economic slowdown will affect how much companies spend on advertising
b.
The risk that users will find a different social media platform to spend their time on.
c.
The risk that Mark Zuckerberg will stay on as CEO
d.
The risk that Mark Zuckerberg will leave as CEO
e.
The risk that new privacy laws will restrict data gathering and access
In: Finance
The Cheebles cookie factory changed their recipe. The inspectors took a sample of the new cookies and found that the sample was 42 grams with a standard deviation of 4 grams. the Cheebles CEO specially asked the inspectors to use these statistics to find the lower and upper boundary weighs of 50% of their cookies. What are the Z values of the limits of the limits of the area covering the middle half of the area under the normal curve that the inspectors would use to find this information for the CEO of Cheebles?
In: Math
Suppose you plan to backpack around Europe after you graduate from the university in 4 years (t=4). You have estimated it will cost you $15,000 to pursue your dream. How much do you need to invest into a saving account today (t=0) to reach your goal in 4 years? Assume your saving account earns 6% per annum. Round your answer to three decimal places.
| a. |
$13,349.946 |
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| b. |
$12,358.959 |
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| c. |
$11,881.405 |
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| d. |
$13,350.946 |
|
| e. |
$11,208.872 |
In: Finance
Mary Guilott recently graduated from Nichols State University and is anxious to begin investing her meager savings as a way of applying what she has learned in business school. Specifically, she is evaluating an investment in a portfolio comprised of two firms' common stock. She has collected the following information about the common stock of Firm A and Firm B:
Expected Return Standard Deviation
Firm A Common Stock .16 .17
Firm B Common Stock .17 .24
Correlation Coefficient .50
a. If Mary invests half her money in each of the two common stocks, what is the portfolio's expected rate of return and standard deviation in portfolio return?
b. Answer part a where the correlation between the two common stock investments is equal to zero.
c. Answer part a where the correlation between the two common stock investments is equal to +1.
d. Answer part a where the correlation between the two common stock investments is equal to −1.
e. Using your responses to questions a—d, describe the relationship between the correlation and the risk and return of the portfolio.
In: Finance
Your friend and colleague has been working for about a year since graduating from university. He has come to you for advice on his saving and spending habits. You have accumulated the following information on his savings and spending that has occurred over the past year:
|
Saving/Spending |
Amount $ |
|
Salary received over the last year, net of income tax |
45,000 |
|
Rent and utilities paid |
16,600 |
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Car expenses paid |
4,800 |
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Credit card debt at the start of the year |
1,000 |
|
Food, entertaining, recreation paid |
6,000 |
|
Credit card debt at the end of the year |
2,500 |
|
Line of credit at the start of the year |
2,500 |
|
Line of credit at the end of the year |
1,200 |
|
Purchase of car |
20,000 |
|
Car loan at the end of the year |
15,000 |
|
Cash account balance at the beginning of the year |
500 |
|
Cash received from disposal of motorcycle |
1,000 |
|
Cash received from disposal of computer |
100 |
|
Cash account balance at the end of the year |
1,000 |
|
Purchase of Investments |
5,500 |
|
Student loan at the beginning of the year |
15,000 |
|
Student loan at the end of the year |
10,000 |
|
Purchase of new computer |
1,500 |
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Interest expense paid |
1,400 |
Instructions
Prepare a statement of cash flow for your friend from information provided above using the direct method.
Can you provide some advice to your friend on how he could improve his cash flow strategies, such as managing debt levels and terms of payment?
Please ensure that your response is written in full sentences and that you provide an explanation and/or a calculation to support your answers.
In: Accounting
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You have recently graduated from university and have accepted a position with Sea-Jewels Inc., the manufacturer of a popular consumer product. During your first week on the job, the vicepresident has been favourably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning to lead a discussion on the variances reported for last period. Anxious to favourably impress the executive committee, you took the variances and supporting data home last night on a memory stick to study. |
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Unfortunately, when you tried to open the files this morning some of them had become corrupted. All you could retrieve is shown below:
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In: Accounting
Q- Suppose after you graduate from University, you find a job that pays you $65,000 a year. Further suppose that you take out a home equity loan of $260,000 for 30 years at an annual interest rate of 3.5 percent, with payments to be made monthly. What will your monthly payments be? If the interest rate increases from 3.5 percent to 5.0 percent, how much will your monthly payments increase? Instead of 30 years, you decide to pay your loan in 25 years, what will your monthly payments be if the interest rate remains at 3.5 percent or increases to 5.0 percent. Develop a chart comparing these monthly payments. Show your work.
In: Finance
Mary Guilott recently graduated from Nichols State University and is anxious to begin investing her meager savings as a way of applying what she has learned in business school.? Specifically, she is evaluating an investment in a portfolio comprised of two? firms' common stock. She has collected the following information about the common stock of Firm A and Firm? B:
Expected Return Standard
Deviation
Firm A's Common Stock 0.16 0.16
Firm B's Common Stock 0.18 0.24
Correlation Coefficient 0.40
a. If Mary invests half her money in each of the two common? stocks, what is the? portfolio's expected rate of return and standard deviation in portfolio? return?
b. Answer part a where the correlation between the two common stock investments is equal to zero.
c. Answer part a where the correlation between the two common stock investments is equal to +1.
d. Answer part a where the correlation between the two common stock investments is equal to -1.
e. Using your responses to questions a-d?, describe the relationship between the correlation and the risk and return of the portfolio.
In: Finance