Suppose that Disney is considering one more Toy Story movie. The company is not confident in box office sales, but they do believe that the file will create merchandising opportunities (DVDs, toys, clothes,..etc). Their early analysis believes the move will have an NPV of -$39.00 million if you only look at ticket sales in the theater. However, they also believe that the movie will create sales of $82.00 million per year in merchandise. The merchandise sales will decline each year by 26.00% in perpetuity. Let’s assume that after-tax operating margin on these sales is 11.00%, and that Disney has a cost of capital at 10.00%.
A) What is the cash flow created by the merchandise side effect in the first year? (answer in terms of millions, so 1,000,000 would be 1.00)
B) Let’s value this as a perpetuity. The merchandise sales will continue indefinitely, BUT the sales will decrease each year. What is the net NPV for creating the movie? (answer in terms of millions, so 1,000,000 would be 1.00)
In: Finance
A stock recently has been estimated to have a beta of
1.32:
a. What will a beta book compute as the “adjusted
beta” of this stock? (Do not round intermediate
calculations. Round your answer to 2 decimal
places.)
b. Suppose that you estimate the following
regression describing the evolution of beta over time:
βt = 0.7 +
0.3βt–1
What would be your predicted beta for next year? (Do not
round intermediate calculations. Round your answer to 3 decimal
places.)
In: Finance
A loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at an interest of 0.75% a month versus a 15-year mortgage with an interest rate of 0.7% a month. Both mortgage are for $100,000 and have monthly payments.
1) What is the monthly payment committed by the 30-year mortgage? And the total payment?
2) What is the monthly payment committed by the 15-year mortgage? And the total payment?
In: Finance
In: Physics
In one city, the probability that a person will pass his or her driving test on the first attempt is 0.7. Assume that 10 people are selected at random from among those taking their driving test for the first time.
(a) [5 points] What are the values of n, p, and q in this problem?
(b) [30 points] What is the probability that at least 8 of the 10 selected people pass the test?
(c) [10 points] Determine the mean and variance of the binomial random variable corresponding to this problem.
In: Statistics and Probability
Specifications for a piece of material used in the manufacture of a bed mattress require that the piece be between a Lower and Upper value (in inches) centered around the process mean. The process that produces the piece yields a mean of 52 and a standard deviation of 0.7 inches. The distribution of output is normal. Within what values will 85.2 percent of sample means fall, if samples of n = 13 are taken and the process is in control?
Question 5 options:
51.353 , 52.646
50.987 , 53.012
51.719 , 52.28
50.255 , 53.744
None of the Above
In: Statistics and Probability
Carbon monoxide (CO) emissions for a certain kind of car vary with mean 2.3 g/mi and standard deviation 0.7 g/mi. A company has 80 of these cars in its fleet. Let y(overbar) represent the mean CO level for the company's fleet.
a) Estimate the probability that y(overbar) is between 2.4 and 2.6 g/mi.
b) There is only a 55% chance that the fleet's mean CO level is greater than what value?
Show your work on TI-84
In: Statistics and Probability
recall that the definition of arbitrage required the satisfaction of three conditions: one about weights, one about risk, and one about returns. Consider the following scenario in a one factor APT:
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What is the expected return of an arbitrage portfolio composed of all three assets, x, y, and z. Weights will be between +1 and -1. Answer is 5.38. please show how to do.
In: Finance
An agricultural runoff diversion system discharges into a small river. The runoff has thefollowing characteristics: flow = 100 m3/min, DO = 3 mg/L, and BOD = 150 mg/L. The riverflows at1000 m3/min and has zero BOD and 9 mg/L of DO. Given that saturation DO is 9.5mg/L, kd is 0.4 day-1, and the ka is 0.7 day-1, calculate the DO and BOD remaining in the stream1.5 days after the discharge event.
In: Chemistry
Explain the difference between a call option and a put option. Explain the difference between an American option and European option. Find the value of a call option using the binomial option pricing formula for single period when given the following information: you have an option with 6 months until expiration, the payoff in the up scenario is $12, and the payoff in the down scenario is $0, the risk-free rate is 5%, the weight for the up scenario is 1.1, and the weight for the down scenario is 0.7.
In: Finance