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You have been asked to assess certain risks of an organization and quantify their potential impact on the organization's profitability. As a result of your inquiry, you have determined that the firm is exposed to two primary risks. One is commodity price risk, namely the cost of oil, which is a large component of the organization's production costs. The second risk is sovereign risk because the organization maintains significant facilities in another country that is considering imposing new taxes on foreign owned businessess.
YOu have further determined that there is a 25% chance that oil prices will increase which would reduce profits by $25000. However, there is a 25% chance that oil prices will fall significantly, which would increase profits by $50000. There is also a chance that oil prices will only fall slightly, improving profits by $5000. With regard to the sovereign risk, there is a 50% chance that the country's government will impose a new tax which would reduce profits by $50000, and a 50% chance that no change will be made to the tax code.
Quantitatively evaluate this data by calculating the expected impact, the standard deviation, and the coefficient of variation for each risk.
The All-State Mutual Fund has the following 5 year record of performance: Determine this no-load fund's five year (2006-2010) average annual compound rate of return.
Out-of-pocket and underwriting costs are $250,000. How many shares must be sold to achieve the desired net to the issuing firm?
Construct a projected income statement. What is the income available to common shareholders after recapitalization?
Describe Capital budgeting decision based on net present value of XYZ Company is considering replacing a printing machine
Show the range in the NPVs for each variable and chart the analysis. Which variable has the highest risk and which variable has the lowest risk? Explain.
Suppose the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of NZ$ is $.52, and the one year forward rate of the NZ$ is $.50. At the end of the year, the spot rate is $.48. Based on this information, what is the ef..
The hospital's 20X2 statement of operations reports rental income of $40,000 and rental expense of $60,000.
What would happen to the money supply if the reserve requirement increased to 14 percent while noncheckable deposits to checkable deposits fell to 35 percent? Assume the other ratios remain as orgiginally stated.
Give the reason why more foreign firms do not sell equity securities in the U.S.
Castro Company, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2007, Castro Company reacquired 1,000 shares of its outstanding stock for $12 each share.
Alex Meir recently won a lottery and has option of receiving one of following three prizes. Supposing an interest rate of 6%, which option would Alex choose?
Determination of current stock price also capital gains and The constant growth model cannot be used because the growth rate is negative
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