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The following tab1e shows the NYSE composite index over a recent 15-year period: End of NYSE Year Composite 1988 156.26 1989 195.01 1990 180.49 1991 229.44 1992 240.21 1993 259.08 1994 250.94 1995 329.51 1996 392.30 1997 511.19 1998 595.81 1999 650.30 2000 656.87 2001 589.80 2002 472.87 2003 646.40 A. Ignoring dividends, calculate the simple annual rates of return. B. Calculate the arithmetic average of the annual rates of return. C. Calculate the geometric average of the annual rates of return. D. Compare your answers in Parts b and c. How do you account for the difference between these averages?
A new piece of equipment costs $100,000 and another $20,000 to modify it for its special use by your firm. The machine falls into the MACRS 3-year class, so that over its 4-year life the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81% ..
Calculate the insurance premium. Assume that the volatility of the index is 15% per annum and the dividend yields and the riskOfree interest rate when expressed as simple rates are approximately the same as the continuously compounded..
A building is appraised at $1 million. This estimate is based on forecasted net rent of $100,000 per year discounted at a 10% cost of capital [PV = 100,000/ 0.1 = 1,000,000]. The rent is the net of repair and maintenance costs and taxes. How much wou..
Due to a recession, expected inflation this year is only 3%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3%. Assume that the expectations theory holds and the real risk-free rate (r*) is 2%. If ..
Consider the following data for a one-factor economy. All portfolios are well diversified. Portfolio A: E(r)=12% Beta=1.2%, Portfolio F E(r)=6% Beta=0% Suppose that another protfolio E is well diversified with a beta of 0.6 and expected return of 7%...
What loan-to-value ratio (M) is implied for the following property if the debt coverage ratio (DCR) is 1.15?
The Next Life has sales of $450,000, total assets of $150,000, total debt of $90,000 and a profit margin of 6.2 percent. What is the return on assets? What is return on equity? The Green House has a profit margin of 7.0 percent on sales of $300,000. ..
You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 10 percent, which is paid semiannually. Compute the price of the bonds based on semiannual ana..
The Caughlin Company has a long-term debt ratio of .43 and a current ratio of 1.50. Current liabilities are $990, sales are $6,410, profit margin is 9.3 percent, and ROE is 20.4 percent. What is the amount of the firm’s net fixed assets?
Southern Markets recently paid a $2.80 annual dividend on its common stock. This dividend increases at an average rate of 3.8 percent per year. The stock is currently selling for $26.91 a share. What is the market rate of return?
What is the value of the bond? What is its value if the interest is paid annually and semiannually - What is the bond's yield to maturity?
AJB Real Estate purchased a ten-acre tract of land for $320,000. The company divided the land into four lots of two and one-half acres each. Lot 1 had a beautiful view of the mountains and was valued at $160,000. Lot 2 had a stream running through it..
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