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Payne slase last year were anemic $1.6 million, but with improved product mix it expects to grow 25% this year. Fixed asses $1,000,000. Debt ratio 60%. Debt interest rate 8%. Policies: tight 45% of project sales, moderate 50% of sales tight up in current assets, relaxed 60% current assets saaless. Earnings before interest and taxes is expected to be 12 % of sales. Tax Rate 40%.
1. What is the expected return on equity under each current asset level?
2. The leel of expected sales is independent of current asset policy. Is this valid assumption? Why or why not?
3. How would the overall riskness of the firm vary under each policy?
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,900 and sell its old washer for $2,900. The new washer will last for 6 years and save $1,650 a year in expenses.
A trader has a put option contract to sell 100 shares of a stock for a strike price of $650. What is the effect on the terms of the contract of:
The repricing model ignores information regarding the distribution of assets and liabilities within maturity buckets. This limitation of the model refers to; a. market value effect b. overaggregation c. runoffs and pre-payments d. OBS activities
Why does money have a time value? Can you provide at least one real life scenario in which you can apply the concepts of time value of money?
The worst case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project. Scenario analysis defines the entire range of results that could be realized from a proposed investment project. Scenario ..
You purchase a small business that is valued at $164857. You decide to borrow $73579 at 5% interest and pay for the rest with equity. The debt is due in one year, and you expect the firm to have cash flows of $67233 in one year. What is your return o..
A stock is expected to pay a dividend of $3.00 the end of the year (that is, D1 = $3.00), and it should continue to grow at a constant rate of 4% a year. If its required return is 14%, what is the stock's expected price 1 year from today? Round your ..
Friendly’s Quick Loans, Inc., offers you $7.25 today but you must repay $9.25 when you get your paycheck in one week (or else) 1)What is the effective annual return Friendly’s earns on this lending business? 2) If you were brave enough to ask, what A..
Black water Corp just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 25 years and a yield to maturity of 8.29%, compounded semi-annually. What is the current price of the bond?
Mattel’s global sourcing in China, like all other toy manufacturers, was based on both low-cost labor, and a growing critical mass of factories competitively vying for contract manufacturing business. Do you think the product recalls and product qual..
Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid annually. Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid semi-annually.
Currency exposures are generally more difficult to identify and measure than to hedge. React to this statement. Is it true or false and why. Describe the primary ways to protect against the adverse consequences of political risk. Describe how capital..
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