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As a financial advisor, you are assigned a new client who is considering investing in one of two stocks, A or B. The table below shows information about the performance of stocks A and B last year. Return Standard Deviation Stock A 15 % 8.3% Stock B 14% 2.1% As a financial advisor, are there factors other than return and risk that should be considered in making this decision? Based on these factors, what stock would you recommend to the client? What reasons will you convey to your client to justify your decision in recommending this stock? How will this recommendation impact the client?
1. Evaluate the advantages and disadvantages of the various decision-making tools listed (e.g., regular payback, discounted payback, net present value (NPV), internal rate of return (IRR), and modified internal rate of return).
Compare and contrast the differences between US Government securities and corporate bonds.
The expected rate of return on the market portfolio is 9.50% and the risk–free rate of return is 1.00%. The standard deviation of the market portfolio is 17.75%. What is the representative investor’s average degree of risk aversion?
Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. If the tax rate is 34 percent, what is the IRR for this project?
Kennedy Gas works has bonds that mature in 10 years, and have a face value of $1000. The bonds have a 10% quarterly coupon. The bonds may be called in five years. The bonds have a nominal yield to maturity of 8% and a yield to call of 7.5%. What is t..
Your firm needs a computerized machine tool lathe which costs $49,000 and requires $11,900 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category...
Abe holds 1 green and 1 red jelly bean in his hand. Bea holds 1 green, 1 yellow, and 2 red jelly beans in her hand. Each randomly picks a jelly bean to show the other. What is the probability that the colors match?
Biogenetics Corporation has a target capital structure of 55 percent equity. The firm just paid dividends of $1.5 per share and dividends are expected to growth at 10 percent a year. The company president has approached you about the company capital ..
El Dorado Company has two production plants. Recently, the company conducted an ABM study to determine the cost of activities involved in processing orders for parts at each of the plants. How might an operations manager use this information to manag..
Economic Order Quantity. The Trektronics store begins each month with 740 phasers in stock. This stock is depleted each month and reordered. If the carrying cost per phaser is $26 per year and the fixed order cost is $340, what is the total carrying ..
Unions have an impact on wage determination. Discuss the four specific areas in which unions have an impact on wage determination?
Revenues generated by a new fad product are forecast as follows: Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 10% of revenues the following year. The product requires an immediate investment..
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