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You run a company, GizmoNet, that produces gizmos. Gizmos hook onto Nintendo Game Boys (hand-held electronic game players), allowing users to access the Internet using wireless communication protocols. Thus, they turn Game Boys into hand-held web browsers. Your company hires software engineers, who are employed for three periods. In period one, they must train at the company. In this period their total productivity is $10M (million), and training costs are $8M. In periods two and three (after the training), productivity is $17M and $19M, respectively. An engineer who received no training would have productivity of $10M at any other firm in all three periods.
Engineers can quit after the training (and always get a job offer at other firms). If they do so, their productivity at other firms is $2M lower than at GizmoNet in each of the last two periods. Assume no discounting.
c. In an economic sense (rather than accounting), who pays for the training investment, and who earns the return on the investment? Briefly explain.
Alcoa Aluminium is experiencing a decrease in demand for their aluminium products. They are looking at ways to increase sales and hopefully profits. Alcoa currently sells 65,000 pounds of aluminium a year at an average price of $9 per pound.
An interest rate is 7% per annum when expressed with annual compounding. What is the equivalent rate with continuous compounding?
What influence would negative interest rates have on bank depositors? Is there a Christian Worldview for such a monetary policy whereby depositors are paid a minuscule savings rate, or even charged a fee on their saving account?
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.8%. Draw a tangent from the ri..
You manage an equity fund with an expected risk premium of 11.8% and a standard deviation of 32%. The rate on Treasury bills is 3.2%. Your client chooses to invest $70,000 of her portfolio in your equity fund and $130,000 in a T-bill money market fun..
The following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): Suppose that Douglas McDonnell shareholders approve ..
What determines the intrinsic value of a financial security (ie. a stock, bond, etc)? - How is the intrinsic value arrived at? (ie. What kind of assumptions are required?) - How do we explain why analysts can come up with different valuations for the..
Fresh Water, INC. Sold an issue of 23-year $1,000 par value bonds to the public. The bonds have a 9.90% coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, INC bonds 9.17%. What is the current market price o..
Explain the relationship between financial information and the financial condition of an organization. In other words, why are financial ratios and financial statements used to evaluate the health of an organization?
What are the linkages among financial decisions, return, risk and stock value? Why are these linkages important? How does the financial manager incorporate these as s/he manages the assets and liabilities of the firm? Be sure to include examples to p..
Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of $8 per order, and carrying costs of $1.60 per unit. Wha..
For a given IOS and MCC, how do financial managers decide which proposed capital budgeting projects to accept, and which to reject?
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