You are interested in the determinants of analyst following for publicly traded companies. You conduct a regression on 76 observations, specified as follows: Analystsi = b0 + b1 (D/E)i + b2 Sizei + error Where Analysts is the natural log of (1 + number of analysts), D/E is the debt to equity ratio of the company, and Size is the natural log of the company's market cap, in millions. Your regression results are as follows:

Based on this information, what would be the predicted number of analysts following a company with a debt to equity ratio of 0.33 and a market cap of 170 million dollars?

Correct Answer is 7.12

hint: Note that both the size and analysts variables in the regression specification are natural logs of the observed quantities. Note also that Analysts is ln(1+number of analysts), since ln(0) is undefined.

PLEASE DO IT ON EXCEL AND SHOW THE STEPS.

MECAB is a large, publicly traded firm that is the market share leader in Electric Cables manufacturing and distribution. The current market data on MECAB securities is as follows:

You are trying to calculate the WACC for two firms. Firm XiG is publicly traded and firm TanW is a private firm. You have collected all necessary information for your WACC calculation:

In terms of liabilities, XiG has account payables of $400Million and a bank loan of $200Million. XiG also has cash holding of $300Million. XiG is current trading at $520/share with 1 Million shares outstanding. XiG’s returns move one to one with the stock market returns.

XiG’s average tax rate is 30% and marginal tax rate of 35%. XiG is rated as Aa1 by Moody’s and similar Aa1 rating firms have cost of debt of 2%. Risk free rate is 1%, market risk premium is 5%.

TanW is in the same industry as XiG. After consulting with an industry expert, you are confident that TanW and XiG have roughly the same business risk. Currently, TanW has net debt to equity ratio of 2. TanW’s average tax rate is 30% and marginal tax rate of 35%. Its cost of debt is 3%.

Now you proceed to calculate the WACC for both firms

Q1. Which firm’s cost of equity (rE) can only be calculated using comparable method?

1. XiG
2. TanW
3. Both
4. Neither

Q2. What is the net debt for XiG?

Input the net debt for XiG: $____ Million

Q3. What is the market value of equity for XiG?

Enter the market value of equity for XiG: $_____Million

Q4. What is WACC for XiG?

            Enter the WACC for XiG: ___% (keep two decimal points)

Q5. What is the asset beta for TanW?

1. 1.01
2. 1.24
3. 1.51
4. 1.60

Q6. What is the WACC for TanW?

1. 6.58
2. 7.12
3. 7.83
4. 8.65

You are trying to calculate the WACC for two firms. Firm XiG is publicly traded and firm TanW is a private firm. You have collected all necessary information for your WACC calculation:

In terms of liabilities, XiG has account payables of $400Million and a bank loan of $200Million. XiG also has cash holding of $300Million. XiG is current trading at $520/share with 1 Million shares outstanding. XiG’s returns move one to one with the stock market returns.

XiG’s average tax rate is 30% and marginal tax rate of 35%. XiG is rated as Aa1 by Moody’s and similar Aa1 rating firms have cost of debt of 2%. Risk free rate is 1%, market risk premium is 5%.

TanW is in the same industry as XiG. After consulting with an industry expert, you are confident that TanW and XiG have roughly the same business risk. Currently, TanW has net debt to equity ratio of 2. TanW’s average tax rate is 30% and marginal tax rate of 35%. Its cost of debt is 3%.

Now you proceed to calculate the WACC for both firms.

What is the net debt, market value of equity and WACC for XiG?

The following​ table, LOADING...​, contains annual returns for the stocks of Company Upper A ​(Upper A​) and Company Upper B ​(Upper B​). The returns are calculated using​ end-of-year prices​ (adjusted for dividends and stock​ splits) retrieved from ​http://www.finance.yahoo.com/. Use the information to create an Excel spreadsheet that calculates the standard deviation of annual returns over the​ 10-year period for Upper A​, Upper B​, and of the​ equally-weighted portfolio of Upper A and Upper B over the​ 10-year period. ​(Hint​: Review the Excel screenshot on page 173​.)

In March 2006, General Motors (GM) announced that it needed to restate its previous year's financial statement. Excerpts from the Wall Street Journal describing the restatements include: GM, which already faces an SEC probe into its accounting practices, also disclosed that its 10-K report, when filed will outline a series of accounting mistakes that will force the car maker to restate its earnings from 2000 to the first quarter of 2005. GM also said it was widening by $2 billion the loss it reported for 2005. Many of the other GM problems relate to rebates, or credits, from suppliers. Typically, suppliers offer an upfront payment in exchange for a promise by the customer to buy certain quantities of products over time. Under accounting rules, such rebates can't be recorded until after the promised purchases are made. GM said it concluded it had mistakenly recorded some of these payments prematurely. The biggest impact was in 2001, when the company said it overstated pre-tax income by $405 million as a result of prematurely recording supplier credits. Because the credits are being moved to later years, the impact in those years was less, and GM said it would have a deferred credit of $548 million that will help reduce costs in future periods. The issue of how to book rebates and other credits from suppliers is a thorny one that has tripped up other companies, ranging from the international supermarket chain Royal Ahold, N.V. to the U.S.-based Kmart Corporation. GM also said it had wrongly recorded a $27 million pre-tax gain from disposing of precious-metals inventory in 2000, which it was obliged to buy back the following year. Gm told investors not to rely on its previously reported results for the first quarter of 2005, saying it had underreported its loss by $149 million. GM said it had prematurely boosted the value it ascribed to cars it was leasing to rental car companies, assuming they would be worth more after the car rental companies were done with them. GM previously had reported a loss of $1.1 billion, or $1.95 a share, for the first quarter. (March 18, 2006) You may assume the amounts are material.

C. Explain the rebates, or upfront rebates, from the companies supplies. Why would the supplies pay the up front credit? What is the proper accounting for the upfront credits? What controls should be in place to account for that upfront credits? How would the auditor test 1.) The controls over the accounting for the upfront credit and 2.) The expenses of certain accounts, are the liability accounts?

D.)Do you believe that the material and the statements were the result of errors or fried? Discuss the reason for your opinion.

Sony Music Publishing Company wants to decide the price of Saylor Twift’s next album. The company conducted a survey of 1000 customers to estimate the willingness-to-pay (WTP) of the customers. The following table summarizes the results of the survey:

a) If Sony decides to charge the customers $18.99 per album, then what will be the revenue per 1000 potential customers?

b) What is the best price to maximize the revenue?

Financial Reporting: Do Small Errors Need to be Reported?

Ben is a recent Santa Clara University graduate who has just started his first job in the finance department of a publicly traded Silicon Valley company. One of his main responsibilities is to create and distribute extensive Microsoft Excel reports that analyze costs and revenues for different divisions. Ben sends completed reports to his direct supervisor and the CFO. The CFO then uses the information to create the company's financial reports, in addition to the strategy and forecasting formulation.

While Ben considers himself to be detailed-oriented, the complicated nature of and the sheer volume of data sometimes overwhelm him, which is exacerbated by their strict deadlines. While Ben works hard to prepare the reports as accurately as possible, he often finds errors after he has submitted his final report. When the errors are critical, he revises the reports and resends them. However, some of the errors are minor, in Ben's estimation, and he doubts that the CFO will use or look at these figures. Ben is ambitious and wants to be promoted, but worries that if he frequently sends out revised reports he will appear unreliable and unqualified. At the same time, the potential consequences from inaccurate financial reports put the company, the CFO and CEO, and Ben himself at risk.

Think about... What actions should Ben take when he catches a mistake? Is he obligated to report every error, particularly since he works for a publicly traded company? Is there such a thing as a small error in this context?

For your post, put yourself in Ben's shoes... You have a family at home that you provide for. What would you do if you caught one of your own errors? Does the amount of the error matter? Are you willing to get fired? How important is trust? How much do you value integrity?

Note: * = p < .05

A) What is the proportion of variance in variable 1 that is predicted by variable 3?

B) What is the proportion of the variance in variable 2 that is not predicted by variable 4?

What are the steps I need to take to solve this problem?