SECURITY MARKET LINE

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 4%, and you believe the following probability distribution for future market returns is realistic:

1. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.)
   
   1. r_i = 2.9% + (5.9%)b_i
   2. r_i = 2.9% + (5.0%)b_i
   3. r_i = 4.0% + (5.9%)b_i
   4. r_i = 1.6% + (7.1%)b_i
   5. r_i = 4.0% + (5.0%)b_i

• 
  
• Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.
  %
  
• Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.5. Should Kish invest in the new company?
  The new stock

3. be purchased.
   
   At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.
   %

Problem 8-6 Expected returns Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 -10% -29% 0.2 6 0 0.4 10 24 0.2 18 28 0.1 30 37 Calculate the expected rate of return, rB, for Stock B (rA = 10.80%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.77%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.

Acquisitions Inc is a brick and mortar retail company. Acquisition’s management believes that the company needs to establish an on-line presence in order to remain viable. For that reason, Acquisition would like to purchase Target Company, an on-line company in a similar line of business. Acquisition believes that Target would also benefit from the merger by gaining access to a brick and mortar outlet.

Some basic information about Acquisition and Target follows:

Analysts hired by Acquisition to value the merger estimate that if the two companies merge, their combined revenues will increase by 5 percent for 3 years and for 3% thereafter. Cost of Goods Sold for the combined firms will be permanently reduced by 2%. assume the market risk premium is 5.5%, the risk free interest rate is 2% and the corporate tax rate is 0.20.

Please find:

1. The status-quo values of Acquisition and Target, using each firm’s WACC to value its assets.
2. The WACC for the combined firm
3. The value of the combined firm with potential synergies considered.
4. Should the merger take place?

Martin Chuzzlewit purchased a vacant lot outside of London for £1,350,000 because he heard that a shopping mall was going to be built on the other side of the road. He figured that he could make a bundle by putting in a fast-food outlet on the site. As it turned out, the rumor was false. A sanitary landfill was located on the other side of the road, and Martin’s land was worthless. (£ denotes the British monetary unit, pounds sterling.)

Required:
With respect to the economic characteristics of costs, what type of cost is the £1,350,000 that Chuzzlewit paid for the vacant lot?

Multiple Choice

• Opportunity cost

• Administrative cost

• Sunk cost

• Selling cost

• Differential cost

1. 1. A supermarket chain wanted to obtain information on the length of time (in minutes) required to service customers. They need to decide on the number of service counters needed for stores to be built in the future. To find the distribution of customer service times, a sample of 60 customers’ service times were recorded and are shown here:      

3.6        1.9        2.1        .3          .8         .2         1.0        1.4        1.8        1.6

1.4        .2         1.3        3.1        .4         2.3        1.8        4.5        .9         .7

1.6        1.9        5.2        .5          1.8        .3          1.1         .6         .7          .6

Find the mode and the 20^th percentile of the above data set.    

An amateur wants to go pro 10 years from now. The amateur is interested to know how much it would cost him to order a custom bike to be built with the following components

Compare the current total value of all items versus the total value by 10 years considering inflation. Determine the average inflation rate of total costs during that period.

Design, implement, and fully test a Python3 function that converts a number to words (words_from_number(number: int)). It should expect to be passed a natural number (such as 12345) and return the corresponding words (i.e., “twelve thousand three hundred forty-five”). Since Python integers can grow arbitrarily large, your code should be flexible, handling at least 20 digits (realistically, it’s just as easy up to 30 digits). Spell everything correctly, and use correct punctuation (hyphens for forty-five and thirty-seven, no commas or plurals). You may only use built-in Python functions, not any modules or third-party libraries!

create your own haunted house 5.What does the outside of your haunted house look like? When was it built? What is its architectural style? 6.What is the history of your haunted house? What happened here? Why is it haunted? 7.Who or what haunts your haunted house? Why are they haunting it? Explain in detail using cosmological or theological information. In other words, is there a religious or philosophical reason why whoever is haunting the house cannot “move on”? 8.What can visitors expect to see/feel/hear/etc. When they visit your haunted house? Be specific here.

An engineering students designs and builds a capacitor from some scrap iron. One piece of iron is a square with side lengths of 10 cm, while the other piece is a rectangle that is 20 cm long and 10 cm wide. The student knows they can keep the plates separated by a distance of 1.2 micrometers.

a. What is the capacitance of this setup?

b. If the capacitor is fully charged using a 1.5 V battery, how much charge is built up on the plates?

c. How much energy is stored?

d. After performing the experiment, the student inserts a dielectric with a k value of 1.2. What values would this change?