Mercado, Inc. has 5,400,000 common shares outstanding at a price of $ 64 each. He has 290,000 preferred shares outstanding with a 5.6% dividend based on the par value of $ 100, which sell for $ 103 each. It has issued 125,000 bonds at 109% of their par value of $ 1,000, with a yield to maturity of 5.93%. The common share's beta is 1.13, the treasury bills rate is 4.3%, and the market risk premium is 6.8%. The applicable tax rate is 34%.

The proportion of common shares of total long-term financing is 67.54%

The cost of common stock is (using Capital Asset Pricing Model) is 11.98%.

The company's weighted average cost of capital (wacc) is
Select one:

a. 7.09%
b. It cannot be calculated with the expected information.
c. 9.45%
d. 10%

Oslo company prepared the following contribution format income statement based on a sales volume of 1000 units the relevant range of production as 500 units to 1500 units

Sales $60000

variable expenses 39000

contribution margin 21000

fixed expenses 14700

operating income 6300

5. If sales Decline to 900 units what would be the net operating income

6. If the selling price increases may $2 per unit and the sale volume and decreases by 100 units what would be the net operating income

7. If the variable cost per unit increases by $1 spending on advertising increases by 1500 and unit sales increased by 200 units what would be the net operating income

8. What is the break even point in the unit sales

.

1. An investor buys a 10 year, 8% annual coupon bond at par (so the yield-to-maturity must be 8%), and sells it after three years (just after the coupon is recieved). Interest rates rise immediately after the purchase, and the bond’s yield-to-maturity jumps to 10% and remains there for the rest of the three year period. Assume coupons are reinvested at the new yield-to-maturity.

1. Show the components of the investor’s “total return,” or portfolio value at the end of the three year period. Your answer should include dollar values for the receipt of scheduled payments, the reinvestment income, and the sale price of the bond. Base your calculations on $100 par value.

2. What is the investor’s “horizon yield”, or realized rate of return, expressed on an annualized basis? If it is different from the bond’s original yield-to-maturity, what explains the difference?

​(Individual or component costs of​ capital)  Compute the cost of capital for the firm for the​ following:

a.  A bond that has a​$1,000par value​ (face value) and a contract or coupon interest rate of11.8percent. Interest payments are​$59.00and are paid semiannually. The bonds have a current market value of​$1124,and will mature in10years. The​ firm's marginal tax rate is34percet.b.  A new common stock issue that paid a​$1.79 dividend last year. The​ firm's dividends are expected to continue to grow at7.3 percent per​ year, forever. The price of the​ firm's common stock is now​$27.97 c.  A preferred stock that sells for​$132 pays a dividend of 9.2 ​percent, and has a​ $100 par value.  d.  A bond selling to yield11.4percent where the​ firm's tax rate is34percent.

a.  The​ after-tax cost of debt isnothing​%.​(Round to two decimal​ places.)

The VP for Fite's Footballs has asked you to perform an audit of inventory levels for a different region. The inventory manager was recently terminated and you need to determine the appropriate safety stock for each item. Management has set the service level at 85%. Given the data below, what would the FILL RATE be for the following item?

choose the correct answer:

Fill Rate = 98.2%

Fill Rate = 98.4%

Fill Rate = 98.6%

Fill Rate = 99.0%

Fill Rate = 99.3%

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $110 million of 10% bonds, dated January 1, on January 1, 2018. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $94 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2018, was $100 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet? 5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

Floor Area Ratio (FAR)

You have purchased the land and lifts of an older ski resort. You are upgrading the lifts and are master planning the real estate development of the ski resort. After studying other resorts you come up with the following (back of the envelope) regression for the sales price per square foot of residential real estate in similar resorts:

P = 300 – 100d – 20F

Where d is distance in miles to the lifts and F is FAR. You ascertain that construction costs will be 140 per square foot regardless of FAR.

Given:

FAR Optimal Density Equation –

F = 160-100(3.587 ^e-8) / 20

Question:

With the Given Information and the Optimal Density Equation, what is the Optimal Point to extend development of the Ski Resort?

Suppose there is a perfectly competitive industry where all the firms are identical with

identical cost curves. Furthermore, suppose that a representative firm’s total cost is given by the equation

where is the quantity of output produced by the firm. You also know that the TC=200 +q^2+q where q is the quantity of output produced by the firm. You also know that the market demand for this product given by the equation P= 1000-2Q where Q is the market quantity. In addition, you are told that the market supply curve is given by the equation P=100 +Q

a. What is the equilibrium quantity and price in this market given this information?

b. What is the firm’s MC equation?

c. What is the firm’s profit maximizing level of production?

d. What is the total revenue?

e. What is the total cost?

f.What is the profit at this market equilibrium?

A fund manager has a portfolio worth $100 million with a beta of 1.5. The manager is concerned about the performance of the market over the next two months and plans to use three-month futures contracts on the S&P 500 to hedge the risk. The current level of the index is 2250, one contract is on 250 times the index, the risk free rate is 2%, and the dividend yield on the index is 1.7% per year. (Assume all the rates are continuously compounded.)

a) What is the theoretical futures price for the three-month futures contract?

b) What position should the fund manger takes to eliminate all exposure to the market over the next two months?

c) Calculate the effect of your strategy on the fund manager’s returns if the level of the market in two months is 2,000, 2,200, 2,500, 2,800, and 3,000.