## Suppose that on Dec. 31, 2006, Company A and Company B

Answer for Suppose that on Dec. 31, 2006, Company A and Company B Enter into a Five-Year in \$1 Only (Instant Download)

6. Suppose that on Dec. 31, 2006, Company A and Company B enter into a five-year swap with the following terms:

• Company A pays Company B an amount equal to 6% per annum on a notional principal of \$20 million
• Company B pays Company A an amount equal to one-year LIBOR + 1% per annum on a notional principal of \$20 million.

Assume that LIBOR is 5.5%.

## Suppose the Price of a Non-Dividend Paying Stock is \$100 Today

Answer for Suppose the Price of a Non-Dividend Paying Stock is \$100 Today for \$1 Only (Instant Download)

7. (20 pts) Suppose the price of a non-dividend paying stock is \$100 today and the continuous compounding interest rate is r = 7%. (7a) Find the range for the price of an American put with strike price X = 110 and T = 2. (75) Suppose that the price of an European call with X = 110 and T = 2 is \$6, find the range for the price of an American put with the same X and T.

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## McKenzie Corporation’s Capital Budgeting Sam McKenzie

McKenzie Corporation’s Capital Budgeting Sam McKenzie

McKenzie Corporation’s Capital Budgeting Sam McKenzie is the founder and CEO of Mckenne Restaurants, Inc., a regional company Sam is considering opening several new restaurant Sally Thornton, the company CFO, ha been put in charge of the capital budgeting analysis. She has examined the potential for the company’s expansion and determined that the success of the new restaurants will depend critically on the state of the economy over the next few years, McKenzie currently has a bond issue outstanding with a face value of 525 million that is due in one year. Covenants associated with this bond issue prolubit the issuance of any ad- ditional debt. This restriction means that the expansion will be entirely financed with equity at a cost of \$9 million, Sally has summarized her analysis in the following table, which shows the value of the company in each state of the economy next year, both with and without expansion Economic Growth Low Normal High Probability 30 Without Expansion \$20,000,000 \$34,000,000 \$11,000,000 With Expansion \$24,000,000 \$45.000.000 \$53.000.000 20

## The 1-year Interest Rates in Norway, ๐๐๐๐พ, is Equal to 3%

Answer for The 1-year interest rates in Norway, ๐๐๐๐พ, is equal to 3% in \$2 Only  (Instant Download)

The 1-year interest rates in Norway, ๐๐๐๐พ, is equal to 3%; – The 1-year interest rates in the US, ๐๐๐ is equal to 1%; – Spot exchange rate is equal to ๐ ( ๐๐๐พ ๐๐๐ท) = ๐๐๐พ ๐๐๐ท 8; – The 1-year forward rate is ๐น ( ๐๐๐พ ๐๐๐ท) = ๐๐๐พ ๐๐๐ท 8.5

Observing the data, you discovered an arbitrage opportunity. Show how to realize a certain profit via covered interest arbitrage. Assume that you can borrow either USD 1,000,000 or NOK 1,000,000 for one year. (Hint: In order to perform a covered interest arbitrage, you borrow in one country and you invest in the other. Thus, you need to decide in which country you borrow, then invest in the other.)

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## You are Preparing an Invoice for a Customer Whose Purchase Lists

Answer for You are Preparing an Invoice for a Customer Whose Purchase Lists in \$1 Only (Instant Download)

31. You are preparing an invoice for a customer whose purchase lists for \$337.50. The customer is entitled to a trade discount of 10/5; the payment terms are 3/15, n/45; and the sales tax rate is 6%. What should be the total amount of the invoice?

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## The Project’s Free Cash Flow to Equity (FCFE) Shows

Which of the following statements is False?
a) The project’s free cash flow to equity (FCFE) shows the expected amount of additional cash the firm will have available to pay dividends but not to buy back shares each year.
b) The NPV of the project’s FCFE should be identical to the NPV computed using the WACC and APV methods.
c) The value of the project’s FCFE represents the gain to shareholders from the project.
d) None of the above.

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## Which of the Following is False? a) Modigliani and Miller’s

Answer for Which of the Following is False? a) Modigliani and Miller’s for \$1 Only (Instant Download)

Which of the following is False?

a) Modigliani and Miller’s conclusions in the presence of taxation, agree with the common view which states that leverage would affect a firm’s value.

b) Leverage increases the risk of equity even when there is risk that the firm may default.

c) The expected return of equity increases in leverage, since investors require a higher expected return to compensate for the increased risk in asset return.

d) Both a) and c).

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## Your Firm is Contemplating the Purchase of a New

7. A) Your firm is contemplating the purchase of a new \$500,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worthless at the end of that time. You will save \$150.000 before taxes per year in order processing costs, and you will be able to reduce net working capital by \$80,000. If the tax rate is 30 percent, what is the IRR for this project? B) In the previous problem you used straight line depreciation. This time use the MACRS 5-depreciation schedule and answer the question again. (The project is still 5 years long).

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## Which of the Following is True? a) In a Modigliani Miller Setting

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Which of the following is True?

a) In a Modigliani Miller setting, the return of levered equity does not depend on the capital structure policy adopted by the firm.

b) Consider the Modigliani Miller setting with taxation. Assume you have computed the value of levered assets via the WACC method, if you subtract from it the value of the unlevered assets, the difference will return the PV of the interest tax shield for any capital structure.

## Netflix, Inc. is an American Over-The-Top Content Platform

Answer for Netflix, Inc. is an American Over-The-Top Content Platform in \$9 Only

Netflix, Inc. is an American over-the-top content platform and production company headquartered in Los Gatos, California. Netflix was founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California. The company’s primary business is a subscription-based streaming service offering online streaming from a library of films and television series, including those produced in-house. As of October 2020, Netflix had over 195 million paid subscriptions worldwide, including 73 million in the United States. The company has offices in France, the United Kingdom, Brazil, the Netherlands, India, Japan, and South Korea.

## On a Saturday Morning in Late September 2015, Desiree Mofakye Sat

Answer for On a Saturday morning in late September 2015, Desiree Mofakye Sat in \$3 Only

On a Saturday morning in late September 2015, Desiree Mofakye sat over her breakfast, which was rapidly turning cold, and reflected on the performance of her personal investment portfolio over the past seven years. She recalled that, after the financial crisis in 2008, she had been advised to avoid U.S. stocks and to put her savings in the emerging economies of GHANA and SA. At the time, she had chosen to allocate her funds to two exchange traded funds (ETF) invested in the equity markets of GHANA and SA, namely ALUWORKS and AGA, in the ratio of 60 per cent and 40 per cent respectively. ALUWORKS was an ETF invested in the public equity markets of SA. The ETF invested in the stocks of large-cap companies operating across diversified sectors. AGA was an ETF that invested in the public equity markets of GHANA. The ETF invested in the stocks of large-cap and mid-cap companies operating across diversified sectors, and tracked the performance of the Ghana Stock Exchange All Share Index (GSI). Although Desiree Mofakye had been satisfied with her portfolio performance over the past seven years, the high growth in these two emerging markets had fizzled out lately. However, the advice she had gathered from analystsโ reports implied that she should stay invested in these markets, albeit with more attention to the volatile swings.

## Kelo Berhad is a Large Telecommunication Firm

(a) Kelo Berhad is a large telecommunication firm whose stock has traditionally been trading in RM8.50 to RM9.50 range. The company currently is facing problems with it illegal setup of communication tower in Sabah, thus instability on stock price will occurred. There is likelihood that the company will be legally prosecuted.

With the following information;

RM9.50 call @ 0.35

RM8.50 put @ 0.45

(i) Outline the strategy and calculate the break-even point(s). (3 marks)

(ii) Draw a table and graph the position. (9 marks)

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## Information about Three investments as below

Information about Three investments as below

If the investor wants to invest in any two of the above investments equally, which combination of two investments you select based on the portfolio risk?

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## The Assets of a Projects will Produce in a Year

Answer for The Assets of a Projects will Produce in a Year for \$2 Only (Instant Download)

The assets of a projects will produce in a year \$90,000 if the economy is bad or \$117,000 if the economy is good. Both outcomes are equally likely. After that the project will be over. The project requires an initial cash outlay of \$80,000. The project’s expected unlevered return on equity is 15% while the risk-free rate is 5%. A firm is considering investing in the project and it is evaluating two different funding alternatives. The first option is to raise the entire \$80,000 issuing equity, while the second alternative is to issue debt for \$45,000 at the risk-free rate and use equity to finance the remainder of the initial investment. Calculate the equity risk premiums for both the levered and unlevered firms, after the project is undertaken. Assume corporate tax rate of 10%.

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## There is a .02 Probability that a Customer’s Visa Charge

Answer for There is a .02 Probability that a Customer’s Visa Charge for \$2 Only (Instant Download)

There is a .02 probability that a customer’s Visa charge will be rejected at a certain Target store because the transaction exceeds the customer’s credit limit. What is the probability that the first such rejection occurs on the third Visa transaction?

.0192

.0200

.0025

.0247

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## Jenny a Trader Speculate that CPO Spot and Future Price

Jenny a trader speculate that CPO spot and future price will decrease due to the poor demand in these few months. She would like to take this opportunity to profit from her expectation. Currently the 3-month CPO futures with 90 days maturity are quoted at RM 2822 per ton.

(i) Outline Jennyโs strategy. (2 marks)
(ii) Illustrate Jennyโs return if the market price for CPO increase by 10% and decrease by 10%.

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## ART has Come Out with a New and Improved Product

Answer for ART has Come Out with a New and Improved Product for \$2 Only

ART has come out with a new and improved product. As a result, the firm projects an ROE of 27%, and it will maintain a plowback ratio of 0.30. Its earnings this year will be \$4.0 per share. Investors expect a 16% rate of return on the stock. What price do you expect ART shares to sell for in 4 years?

a) \$44.77

b) \$83.15

c) \$48.40

d) \$52.40

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