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Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 19.7%; and that the coefficient variation, CV, is 1.32, answer the following questions:
a. The standard deviation of return is __% (round to three decimal places)
b.
1. The lowest possible expected return associated with a 68% probability of occurrence is __% (round to two decimal places)
2. The highest possible expected return associated with a 68% probability of occurrence is __% (round to two decimal places)
3. The lowest possible expected return associated with a 95% probability of occurrence is __% (round to two decimal places)
4. The highest possible expected return associated with a 95% probability of occurrence is __% (round to two decimal places)
5. The lowest possible expected return associated with a 99% probability of occurrence is __% (round to two decimal places)
The current one-year T-bill rate is .30 percent and the expected one-year rate 12 months from now is 1.00 percent. According to the unbiased expectations theory, what should be the current rate for a two-year Treasury security?
Snider Industries sells on terms of 3/10, net 40. Total sales for the year are $1,814,500. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 60 days after their purchases. What is the days sales ou..
Health Services Corporation (HSC) is capitalized with 10 million dollars in debt at 7% and an additional 15 million in Equity for which investors expect a 20% rate of return. If the company’s tax rate is 40%, what is HSC’s weighted average cost of ca..
Cummings has EAT, depreciation expense, capital expenses, debt and debt principal payments of $9m, $2.8m, $1.3m, $40m and $1.5m respectively. Cummings plows about 30% of its profits back into its business. Derive the value of Cummings, if the growth ..
Suppose the spot exchange rate for the Canadian dollar is Can$1.15 and the six-month forward rate is Can$1.19. Assuming purchasing power parity (PPP) holds, what is the cost in the U.S. of a Moosehead beer if the price in Canada is Can$2.50? Identify..
A company sold a piece of equipment during the current tax year for $78,600. The accounting records show that its cost basis, B, is $190,000 and the accumulated depreciation is $139,200. Assume that the effective income tax rate is 40%. The tax liabi..
This problem concerns the effect of taxes on the various break-even measures. Consider a project to supply Detroit with 30,000 tons of machine screws annually for automobile production. You require a return of 12 percent and face a marginal tax rate ..
When comparing option hedging (hedging with options) to futures hedging (hedging with futures), which statement is most true:
Why does the balance sheet report historical cost information instead of market values for assets? Please explain
ABC corp. has equity with a market value of $750 million, debt with a market value of $330 million, and future operating lease commitments with a present value of $400 million. The firm also has a Beta of 1.2, a pre-tax cost of debt of 8%, and a marg..
Howard gives his money manager 100,000 at the beginning of the year. in 6 months the account is worth 105,000 and Howard immediately gives the manager an additional 95,000. At the end of the year, the account is worth 220,000. What is the time-weight..
Broussard Skateboard's sales are expected to increase by 25% from $7.8 million in 2013 to $9.75 million in 2014. Its assets totaled $4 million at the end of 2013. Baxter is already at full capacity, so its assets must grow at the same rate as project..
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