Questions
Problem 5: CAPM and Cost of Capital (20 marks) Columbia Gas Company (CGC) is a publicly...

Problem 5: CAPM and Cost of Capital
Columbia Gas Company (CGC) is a publicly listed company with a current share price of
$25 per share. CGC has 33 million shares outstanding and $100 million in long-term debt. CGC’s long-term debt consists of bonds issued with a face value of $100 million with 10 years to maturity with annual coupon rate of 11% (APR). The long-term bonds are currently trading at par value.
Columbia Gas Company (CGC) has a standard deviation of 36% and a correlation with the market of 0.85. Assume the risk-free rate is 4% and the market portfolio has an expected return of 13% and a standard deviation of 22%. The corporate tax rate is 30%.
A. What are the three main assumptions of capital asset pricing model (CAPM)? Are these assumptions realistic in the real world? Explain.
B. Calculate CGC’s beta with the market?
C. Calculate CGC’s cost of equity?
D. Calculate CGC’s after-tax cost of debt?
E. Calculate CGC’s weighted average cost of capital (WACC)?

In: Accounting

VITALSTATISTIX, INC. 2017 Balance Sheet Items Assets Liabilities and Owners’ Equity Cash $200 Accounts Payable $200     ...

VITALSTATISTIX, INC.

2017 Balance Sheet Items

Assets Liabilities and Owners’ Equity

Cash $200 Accounts Payable $200     

Accounts Receivable 400 Notes Payable 100

Inventory 650 Long-Term Debt 1,050

Net Plant and Equipment 2,400 Common Stock 500

      Paid-in Surplus 1,500

                                                                  Retained Earnings 300



VITALSTATISTIX, INC.

2017 Income Statement

Sales $2,700

Cost of Goods Sold 800

Depreciation     100

Earnings Before Interest and Taxes $1,800

Interest Paid      150

Taxable Income $1,650

Taxes     550

Net Income $1,100

13. Vitalstatistix, Inc. has 500 shares of common stock outstanding, and the stock

      price at the end of the year was $17.50. Calculate its Market-to-Book Ratio.

(2 points)

14. Calculate the following financial ratios for Vitalstatistix, Inc.

a) Current Ratio (2 points)


b) Total Debt Ratio (3 points)

Total Debt Ratio = (Total Assets – Total Equity) / Total Assets

c) Return on Equity (2 points)















In: Finance

A monopolist (Firm 1) may be a low-cost type, with constant marginal cost of production 10,...

A monopolist (Firm 1) may be a low-cost type, with constant marginal cost of production 10, or a high-cost type, with constant marginal cost of 20, with probabilities p and 1-p respectively. It has no fixed cost. Only the monopolist knows his type. The game has two stages. In stage one, a potential entrant (Firm 2) with constant marginal cost of 15 decides whether to enter the market. Entry requires a fixed investment of $100. If Firm 2 enters the market, it learns what Firm 1’s type is, and both engage in Bertrand competition in homogeneous products in the second stage. Consumer demand is 100 units regardless of the price.

(a)What is the Nash Equilibrium of the second-stage game if Firm 2 enters? Solve the game for each type of Firm 1.

(B)Argue that Firm 2 would not enter if it believes Firm 1 is certainly low cost but would enter if it believes Firm 1 is certainly high cost.

(C)What is the value of p under which Firm 2 will decide to enter?

In: Economics

Table Product: PROD_ID PROD_NAME PROD_PRICE PROD_VENDOR 1101 Table 100 2 1102 Chair 80 3 1103 Armchair...

Table Product:

PROD_ID

PROD_NAME

PROD_PRICE

PROD_VENDOR

1101

Table

100

2

1102

Chair

80

3

1103

Armchair

90

2

1104

Nightstand

110

1

1105

Bed

200

3

1106

Dresser

150

3

1107

Daybed

190

2

1108

Ash Table

120

2

1109

Cherry Table

130

2

1110

Table - High

100

2

1111

Office Chair

110

3

Table Vendor:

VEND_ID

VEND_NAME

VEND_ST

1

Green Way Inc

GA

2

Forrest LLC

NC

3

AmeriMart

NC

Please write the SQL script and provide screenshots of results for these below queries. Please include the SQL in text format, and all screenshots in one single document.

  1. Find the total number of table products
  2. Find the average price of all tables
  3. Find the total number of products from each vendor
  4. Find the average prices by vendors (please include vendor names in the query result)
  5. Find the average prices by states

In: Computer Science

After graduating from university last year with a degree in accounting and finance, Jim Hale took...

After graduating from university last year with a degree in accounting and finance, Jim Hale took a job as a trainee analyst for an investment company in Melbourne. Jim’s first few weeks were filled with a series of rotations throughout the firm’s various operating units, but this week he was assigned to one of the firm’s traders as an analyst. On Jim’s first day, his boss called Jim in and told him he wanted to do some rudimentary analysis of the investment returns of the regional airline Regional Express Holdings Ltd (REX). Specifically, Jim was given the following month-end closing prices for the company spanning the months from September 2019 to August 2020:

Date Closing Price Date Closing Price
30 Aug 13 1.11 31 Mar 14 0.81
30 Sep 13 1.04 30 Apr 14 0.77
31 Oct 13 1.03 30 May 14 0.75
29 Nov 13 0.92 30 Jun 14 0.75
31 Dec 13 0.93 31 Jul 14 0.89
31 Jan 14 0.91 29 Aug 14 0.82
28 Feb 14 0.82

Jim was then instructed by his boss to complete the following tasks using the REX price data (note that REX paid no dividend during 2008).

1. Compute the monthly realized rates of return earned by REX for the entire year.

2. Calculate the average monthly rate of return for REX, using both the arithmetic and geometric averages.

3. Calculate the year-end price for REX, computing the compound value of the beginning-of-year price of $ 1.11 per share for 12 months at the geometric average monthly rate of return calculated earlier: End-of-year stock price = Beginning-of-year stock price X (1+ Geometric average monthly rate of return)12

4. Compute the annual rate of return for REX using the beginning share price for the period and the ending price (i.e. $1.11 and $0.82).

5. Use the geometric average monthly rate of return and the following relationship to calculate the annual rate of return: Compound annual rate of return= (1+ Geometric average monthly rate of return)12 -1

6. If you were given annual rate of return data for REX or any other company’s shares and you were asked to estimate the average annual rate of return an investor would have earned over the sample period by holding the shares, would you use an arithmetic or geometric average of the historical rates of return? Explain your response as if you were talking to a client who has had no formal training in finance or investments.

(NOTE:- THE SOLUTION IS NOT TO BE DONE ON MS EXCEL)

In: Finance

Q1 multipule Quastions please answer 1- Economists assume that rational behaviour is useful in explaining choices...

Q1 multipule Quastions

please answer

1- Economists assume that rational behaviour is useful in explaining choices people make

Select one:

because irrational people do not make economic choices.

even though people may not behave rationally all the time.

because individuals act rationally all the time in all circumstances.

even though people rarely, if ever, behave in a rational manner.

2-If a decrease in income leads to an increase in the demand for macaroni, then macaroni is:

Select one:

a. a normal good.

b. an inferior good.

c. a neutral good.

d. a necessity.

3- A surplus in a market means:

Select one:

a. quantity demanded is greater than quantity supplied.

b. demand is greater than supply.

c. quantity supplied is greater than quantity demanded.

d. supply is greater than demand.

4- If a straight line passes through the point x = 24 and y = 8 and also through the point x = 8 and y = 16, what is the slope of this line?

Select one:

a. 0.5

b. -2

c. 2

d. -0.5

5- In economics, an optimal decision involves carrying out an activity up to the point where:

Select one:

a. the marginal benefit of the activity is equal to the marginal cost of the activity.

b. the opportunity cost of the activity is negative.

c. the opportunity cost of the activity is zero.

d. the marginal benefit of the activity is greater than the marginal cost of the activity.

6-The principle of opportunity cost is that

Select one:

taking advantage of investment opportunities involves costs.

the economic cost of using a factor of production is the alternative use of that factor that is given up.

the cost of production varies depending on the opportunity for technological application.

in a market economy, taking advantage of profitable opportunities involves some money cost.

7-Assume that the prices of airline tickets (assuming airline tickets are normal goods) have fallen in recent months. Over this same period, assume that the price of jet fuel has risen and consumer incomes have fallen. Which of the following best explains the falling prices of airline tickets?

Select one:

a. The demand curve and the supply curve for airline tickets have both shifted to the right.

b. The supply curve for airline tickets has shifted to the left by more than the demand curve has shifted to the left.

c. The supply curve for airline tickets has shifted to the right while the demand curve for airline tickets has shifted to the left by a greater amount than the supply shift.

d. The demand curve for airline tickets has shifted to the left by more than the supply curve has shifted to the left.

8-The production possibility frontier model shows that

Select one:

if all resources are fully and efficiently utilised, more of one good can be produced only by producing less of another good.

economic growth can only be achieved by free market economies.

a market economy is more efficient in producing goods and services than is a centrally planned economy.

if consumers decide to buy more of a product, its price will increase.

9-The study of economics that examines issues such as employment and income is known as:

Select one:

a. positive economics.

b. microeconomics.

c. macroeconomics.

d. normative economics.

10-The law of demand states that holding everything else constant:

Select one:

a. there is an inverse or downward-sloping relationship between price and quantity.

b. there is a positive or upward-sloping relationship between price and quantity.

c. buyers reduce the amount of a good bought when there is more in the market.

d. buyers increase the quantities they buy when their incomes increase.

11-An increase in the quantity supplied is caused by:

Select one:

a. a higher market price.

b. an advance of technology.

c. a decrease in the incomes of buyers.

d. a decrease in the price of inputs.

12-What assumptions do economists make about people?

Select one:

a. People prefer to live in a society that values fairness above all else.

b. Economists make no assumptions are human behaviour.

c. People are greedy and selfish.

d. People are rational and respond to incentives.

12-A produce cooperative sells trays of mixed vegetables for $80 each. The cost per tray is $50. For a total price of $90 the cooperative will deliver within the town boundary, a service that adds an additional $15 to the total cost of the package. Should the cooperative continue to offer the delivery service?

Select one:

More information is needed to make this decision.

Yes, the cooperative still makes a profit by offering a delivery service with vegetable tray purchases.

Yes, but only if the cooperative raises the price of vegetable trays.

No, the cooperative's marginal benefit is less than marginal cost.

13-Consider the following statements:

a.    Car owners purchase more petrol from a petrol station that sells petrol at a lower price than other rival petrol stations in the area.

b.    Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.

c.    Firms produce more of a particular DVD when its selling price rises.                                                                               

14-Which of the above statements demonstrates that economic agents respond to incentives?

Select one:

b only

c only

a and b

a, b and c

15-The substitution effect of a price change refers to the:

Select one:

a. movement along a demand curve when the price of a substitute good changes.

b. shift in the demand curve due to a change in purchasing power brought about by the price change.

c. change in quantity demanded that results from a change in price, making a good more or less expensive relative to other goods that are substitutes.

d. movement along the demand curve due to a change in purchasing power brought about by the price change.

16-The expectation of higher future prices causes higher prices now because:

Select one:

a. supply will increase now as firms try to sell more before the price rises.

b. demand will increase now as people try to buy before price rises.

c. quantity supplied will decrease now.

d. quantity demanded will increase now.

17-Suppose that real wages in a country were $800 per week in 2011 and $825 per week in 2012. Which of the following correctly calculates the percentage change in real wages between 2011 and 2012 (to one decimal place)?

Select one:

a. [($800-$825)/$800] x 100 = - 3.1%.

b. [($825-$800)/$800] x 100 = 3.1%.

c. ($825 - $800)/100 = 0.25%.

d. [($800-$825)/$825] x 100 = 3.0%.

18-Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?

Select one:

a decrease in the cost of transporting olive oil to markets

an increase in the price of land used to plant olives

an increase in the price of olive oil presses

research finds that consumption of olive oil reduces the risk of heart disease

19-If the demand for cars increases when the price of petrol decreases, then:

Select one:

a. the two goods are complementary.

b. the two goods are substitutes.

c. petrol is a normal good.

d. cars are an inferior good.

20-Which of the following would not result in a positive shift in the demand curve for coffee?

Select one:

a. A fall in the price of coffee.

b. A fall in the price of milk and sugar.

c. An increase in the price of tea.

d. Research findings that drinking coffee increases your life span.

In: Economics

The nurse hears in report that a client receiving parenteral nutrition (PN) at 100 mL/hr has...

The nurse hears in report that a client receiving parenteral nutrition (PN) at 100 mL/hr has bilateral crackles and 1+ pedal edema. When the nurse obtains a daily weight, the nurse notes that the client has gained 4 lb in 2 days. Which of the following nursing actions should the nurse take first? Must pick which answer they think is correct and then also state why the others are wrong.

1. Encourage the client to cough and deep-breathe.

2. Compare the intake and output records of the last 2 days.

3. Slow the PN infusion rate to 50ml/hr per infusion pump.

4. Administer the prescribed daily diuretic and check the patient in 2 hours.

In: Nursing

Find the area of the shaded region. The graph to the right depicts IQ scores of​...

Find the area of the shaded region. The graph to the right depicts IQ scores of​ adults, and those scores are normally distributed with a mean of 100 and a standard deviation of 15. Click to view page 1 of the table. LOADING... Click to view page 2 of the table. LOADING... 75115 A graph with a bell-shaped curve, divided into 3 regions by 2 lines from top to bottom, one on the left side and one on the right side. The region between the lines is shaded. Moving from left to right, the x-axis below the first line is labeled 75. The x-axis below the second line is labeled 115. The area of the shaded region is nothing. ​(Round to four decimal places as​ needed.)

In: Statistics and Probability

Problem #3: Sam is considering buying a new lawnmower. He has a choice between a Yard...

Problem #3: Sam is considering buying a new lawnmower. He has a choice between a Yard Machine mower and a Lawn Guy mower. Sam has a MARR of 10%. The salvage value of each mower at the end of its service life is zero.

Yard Machine mower

Lawn Guy mower

First Cost

$450

$350

Life

10 Years

10 Years

Annual Gas Cost

$80

$100

Annual Maintenance Cost

$30

$40

  1. Using the information above, determine which alternative is preferable. Use the Present Worth comparison.
  2. Instead of using the present worth comparison in part (a), use the Annual Worth comparison method to justify your selection.

In: Economics

The reaction, A + 2 B → C was studied. The reagents A and B were...

The reaction, A + 2 B → C was studied. The reagents A and B were mixed and the time interval until a certain quantity of product C accumulated was measured.

run 1: [A]initial = 0.100, [B]initial = 0.140, time = 25 s

run 2: [A]initial = 0.050, [B]initial = 0.140, time = 50 s

run 3: [A]initial = 0.100, [B]initial = 0.070, time = 100 s

From this data, one conclusion that can be made is that the reaction is:

Select one:

a. first order with respect to substance A

b. zero order with respect to substance A

c. one-half order with respect to substance A

d. second order with respect to substance A

e. third order with respect to substance B

In: Chemistry