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Get college assignment help at uniessay writers 14. More on the time value of money Aa Aa Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues for the ADLA are $600 per year and must be paid at the beginning of each year. For instance, membership dues for the first year are paid today, and dues for the second year are payable one year from today. However, the ADLA also has an option for members to buy a lifetime membership today for $5,000 and never have to pay annual membership dues. Obviously, the lifetime membership isn’t a good deal if you only remain a member for a couple of years, but if you remain a member for 40 years, it’s a great deal. Suppose that the appropriate annual interest rate is 7.4%. What is the minimum number of years that Lloyd must remain a member of the ADLA so that the lifetime membership is cheaper (on a present value basis) than paying $600 in annual membership dues? (Note: Round your answer up to the nearest year.) 12 years 19 years 21 years 17 years In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 5.25% annual interest rate, what is its value as of 2012 (386 years later)? $10,438,579,954.25 $11,981,674,382.27 $7,715,472,140.10 $9,077,026,047.17

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General Directions Use the conventional form of variables. decision variables (X1, X2, X,,..) slack variables artificial variables (As, Az, As,-..) Define all variables used Maintain all solutions in fractional form (Si, S2, S),..) 1. Fil-Am Properties has invested in the development of an indoor shopping center mall in the Cainta suburbs. It must now plan for the size and quantity of stores to lease in the malL Smaller stores having 2,500 square feet are more profitable, but large “anchor stores (approximately 250,000 square feet) are necessary to attract sufficient volumes of traffic Medium-sized stores average around 100,000 square feet. The mall will contain 1 million square feet, and Fil-Am Properties wants at least one large anchor store in the mall. Furthermore, it wants a 3:1 ratio of medium to large stores and the total square footage of small stores to be 1.5 times that of medium and large stores combined. Leasing rates are anticipated to be P2,650,000, P1,200,000, and P200.000 per year for large, medium-sized, and small stores, respectively, Formulate a linear programming model to determine the most profitable store configuration in the new mall. 2. BBC Co. sells IBM-compatible microcomputers. It sells a desktop and a portable unit. The firm makes P9,000 on each desktop it sellls and P7,000 on each portable. Because of limited production, the manufacturer cannot ship more than 50 desktop units or more than 80 portable units next month. Dealer assembly and customer checkout time requires 3 hours for a desktop and 2 hours for a portable unit. Assuming that BBC has 200 work hours available next month, determine the number of desktop and portable units it should order, using the graphical solution method. Assume that it can sell all that are ordered. 3. Solve the following linear programming problem using the simplex method (retain all figures in fractions): Z-2X1 4X Maximize: 3X1 X2 3 4X1 3X26 Xi 2X23 Xi, X2>0 Subject to: GOOD LUCK AND ENJOY!

Cost of Capital Practice Problems 1. Why Is It that, for a given firm, that the required rate of return on equity is always greater than the required rate of return on its debt? The required rate of return on equity is higher for two reasons: The common stock of a company is riskier than the debt of the same company. The interest paid on debt is deductible for tax purposes, whereas dividends paid on common stock are not deductible. 2. The Mountaineer Airline Company has consulted with its investment bankers and determined that they could issue new debt with a yield of 8%. If Mountaineer marginal tax rate is 39%, what is the after-tax cost of debt to Mountaineer? 3. The Blue Dog Company has common stock outstanding that has a current price of $20 per share and a $0.5 dividend. Blue Dog’s dividends are éxpected to grow at a rate of 3% per year, forever. The expected risk-free rate of interest is 2.5%, whereas the expected market premium is 5%. The beta on Blue Dog’s stock is 1.2. a. What is the cost of equity for Blue Dog using the dividend valuation model? b. What is the cost of equity for Blue Dog using the capital asset pricing model? 4. Gaggle Internet, Inc. is evaluating its cost of capital under alternative financing arrangements. In consultation with investment bankers, Gaggle expects to be able to issue new debt at par with a coupon rate of 8% and to issue new preferred stock with a $2.50 per share dividend at $25 a share. The common stock of Gaggle is currently selling for $20.00 a share. Gaggle expects to pay a dividend of $1.50 per share next year. Market analysts foresee a growth in dividends in Invest stock at a rate of 5 % per year. Gaggle’ marginal tax rate is 35%. a. If Gaggle raises capital using 45% debt , 5 % preferred stock, and 50% common stock, what is Gaggle’s cost of capital? b. If Gaggle raises capital using 30 % debt , 5 % preferred stock, and 65 % common stock, what is Gaggle’s cost,of capital?

4. The Net Present Value (NPV) of a project is $6 million, for a 10%pa discount rate. It becomes negative, -$4 million, if the discount rate is 15 per cent. If this is a linear function, what would the Internal Rate of Return (IRR) be for this project? 5. What is the internal Rate of Return (IRR) of the following cash flow stream produced from a small gold mining operation shown below? Year 2 Year 1 Year 3 Year 4 $35.3M Figure: Cash flow stream from small gold mining operation $44.2M $25.1M $15.9M 6. A 70 tonne bottom dump truck costs $800,000. The company purchasing this truck will pay 50% of the total price up front and the rest will be paid off in 8 equal instalments over 8 years at an annual interest rate of 7% starting in year 1. How much does the company need to pay each year across the eight year period?

who said “Germany must be unified at any price”?

Hamtramck, Inc. has the following financial data NOW: w 0 Unlevered Beta 1.25 R 3.0% R. 12.0% N of Stock 100,000 142,500 Tax rate 35% Equity Value S= 1,000,000 EBIT growth of EBIT g 5% S.T Investment 0 Expect to have: 25% Debt and 75% Equity K at W9.0% 1. What is their Price of Stock NOw? 2. What is their new beta at (D-25% and S-75%)? 3. What is Hamtramck’s cost of equity at (D-25% and S-75%)? 4. What is Hamtramck’s WACC at the new capital structure at (D-25% and S-75%)? 5. What is Value of Operation V, at (D-25% and S-75%)? 6. What is the Value of Stock after Debt at (D-25% and S-75%) but before repurchase?

19) You are evaluating a company’s stock. The stock just paid a dividend of $1.75. Dividends are expected to grow at a constant rate of 5 for long time into the future. The required rate of return (Rs) on the stock is 12 percent. What is the fair present value? A) $26.25 B) $22.50 C) $35.26 D) $50.25 E) None of these choices are correct.

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An existing robot is being used to run several processes. Due to digital transformation towards Industrial Revolution 4.0, the robot needs to be upgraded its data analytic competency at a cost of $2,000 If the company decided not to upgrade, an alternative would be to invest on a new advanced technology robot which has been identified as potential replacement of the existing robot. The accompanying estimates in Table Q4 have been developed from information provided by some current users of the new robot and data obtained from the manufacturer. The firm’s before-tax MARR is 25% per year. Jadual S4/Table Q4 Robot sedia ada Existing robot Robot baru New robot Nilai pasaran semasa Current market value Kos peningkatan sistem (tahun 0) System upgrade cost (year 0) Harga pembelian Purchase price Kos pemasangan Installation cost Perbelanjaan tahunan Annual expenses $40,000 $2,000 $50,000 $5,000 $1,400 pada tahun pertama, dan meningkat pada kadar meningkat sebanyak 8% setahun selepas itu $1,000 pada tahun pertama, dan $150 setahun selepas itu $1,400 in year one, and $1,000 in year one, and increasing at the rate of increasing by $150 per 8% per year thereafter year thereafter Jangka hayat (tahun) Useful life (years) MV pada hujung jangka hayat MV at end of useful life 5 10 -$1,000 $5,000 Based on this information, should the existing robot be replaced? Assume that a robot will be needed for an indefinite period wanTobOt Dard dalan waran. If the company were to invest in the new robot, additional to the purchase price installation cost and annual expenses mentioned in Table Q4, the company will also require employing data analytic specialist at an annual cost of $24,000. With the new robot, the company will receive annual benefits of $40,000 from rental receipts and $20,000 from convenience benefit Apply the B-C ratio method with a study period of 10 years to determine whether the new robot investment is justified unapiad nnR PUIRS uRumuauaUL

Get college assignment help at uniessay writers 1.(10) In each of the theories of capital structure, the cost of equity increases as the amount of debt increases. So why don’t financial managers use as little debt as possible to keep the cost of equity down? After all, aren’t financial managers supposed to maximize the value of a firm? oilk

North West Sr. is creating a college fund for his two kids, South and J-C, ages 5 and 3, respectively. To take over the fashion Empire, they will start college at 18 years old. Today, Harford Univers ity of Fashion costs $25,000, per student, and this cost is expected to increase by 5% each year. West Sr. plans to make 19 annual contributions to the college fund, and he plans to increase the contrilbutions by 8% each year to combat inflation. The first contribution of $8,656.37 will be made today. The last disbursement from the college fund will be on J-C’s 21st birthday. On that day, also, the last payment must be made for his last year of college. As West Sr’s investor, you promised he will earn 3.7 % return on his contributions. Using the above information, fill in the Table below. (Us eful Hint: You will need to draw-down on the college fund acccount to pay for tuition once the kids are in college. Moreover, look out for the years when they are both in school Deposit Amount $8,656.37 Interest Rate 3.7% College Cost This Year $25.000 Cost Growth Rate 5,0% Contribution Growth Rate 8.0% Value of Last Contribution South’s Age J-C’s Age Deposits Balance Year Tuition Costs 4 10 11 12 10 13 11 14 12 13 10 15 11 16 14 12 17 15 13 18 16 14 19 17 15 20 18 16 21 19 17 27 20 Check Point: West Sr. refuses to leave any money on the table se 18 23 21

(Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 6.5 percent, and the expected retum require for each individual security? r the market is 13 percent. Using the CAPM, what rates of retum should Anita Stock Beta 0.84 1,63 . return for security H, which has a beta of 0.84, is%. two decimal places.) a. The expected rate (Round b. The expected rate of return for security T, which has a beta of 1.63, is% (Round to two decimal places.) f return for security P, which has a beta of 0.84, is%. (Round to two decimal places.) . The expected rate d. The expected rate of return for security W, which has a beta of 1.43, is%. (Round to two decimal places.)

ra portfolio of two risky investments) Mary Guilott recently graduated from college and is evaluating an investment in two companies’ common stock. She has collected the following information about (Computing the standard deviation the common stock of Firm A and Firm B: E a. If Mary decides to invest 10 percent of her b. If Mary decides to invest 90 percent of her money in Firm A’s common stock and 10 percent in Firm B’s common stock, what is the expected rate of return and the standard deviation of the portfolio return? c. Recompute your responses to both questions a and b, where the correlation between the two firms’ stock returns is -0.30. d. Summarize what your analysis tells you about portfolio risk when combining risky assets in a portfolio. y in Firm A’s common stock and 90 percent in Firm B’s common stock, w the expected of retum a he standard deviation of the portfolio return? a. If Mary decides invest 10% of her money in Firm A’s common stock and 90 % in Firm B’s common stock and the correlation coefficient between the two stocks is 0.30, then the expected rate of retum in the portfolio is %. (Round to two decimal places.) The standard deviation in the portfolio is%. (Round to two decimal places.) %. (Round to two b. If Mary decides decimal places.) invest 90% of her money in Firm A’s common stock and 10 % in Firm B’s common stock and the correlation coefficient between the two stocks is 0.30, then the expected rate of retum in the portfolio is The standard deviation in the portfolio is%. (Round to two decimal places.) c. If Mary decides to invest 10 % of her money in Firm A’s common stock and 90 % in Firm B’s common stock and the correlation coefficient between the two stocks is 0.30, then the expected rate decimal places.) %. (Round to two the portfolio is return %. (Round to two decimal places.) The standard deviation in the portfolio is If Mary decides to invest 90 % of her money in Firm A’s common stock and 10 % in Firm B’s common stock and the correlation coefficient between the two stocks is 0.30, then the expected rate of retun in the portfolio is%. (Round to two decimal places.) The standard deviation of the portfolio is%. (Round to two decimal places.) d. What does your analysis tell you about portfolio risk when combining risky assets in a portfolio? (Select the best choice below.) OA. You can maintain the same retun in a portfolio but lower risk if the stocks are negatively correlated rather than positively correlated. Regardless of correlation, risk can also be lowered by investing a higher proportion of the portfolio in stock with higher standard deviation, this however will reduce return. tocks are positively correlated rather than negatively correlated. Regardless of correlation, risk can also be lowered by investing a higher proportion of the portfolio in stock with higher standard deviation, this however will increase return f correlation of two stocks You can maintain the same return in a portfolio but lower risk more if the stocks are negatively correlated rather than positively correlated. of the portfolio in stock with lower standard deviation, this however will effect retum. O D. You can maintain the same return in a portfolio but lower risk more if the stocks are positively corelated rather than negatively correlated. proportion of the portfolio in stock with lower standard deviation, this however will reduce return. the same, risk can also be lowered investing a higher proportion the same, risk can also be lowered I f correlation of the two stocks investing a higher (Related to Checkpoint 8.3) (CAPM and expected returns) a. Given the following holding-period retuns, EB, compute the averace returns and the standard deviations for the Sugita Corporation and for the market. f Sugita’s beta is 1.46 and the risk-free rate is 9 percent, what would be an expected return for an investor owning Sugita? (Note: Because the preceding returns a them comparable with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) c. How does Sugita’s historical average retun compare with the return you should expect based on the Capital Asset Pricing Model and the firm’s sysstematic risk? e based on monthly data, you will need to annualize the returns make % . (Round a. Given the holding-period returns shown in the table, the average monthly return for the Sugita Corporation is three decimal places.) The standard deviation for the Sugita Corporation is%. (Round to two decimal places.) Given the holding-period retums shown in the table, the average monthly return for the market is %. (Round to three decimal places.) The standard deviation for the market is%. (Round to two decimal places.) b. If Sugita’s beta is 1.46 and the risk-free rate is 9 percent, the expected return an investor owning Sugita is%. (Round to two decimal places.) The average annual historical return for Sugita is%. (Round to two decimal places.) c. How does Sugita’s historical average retun compare with the return you should expect based on the capital asset pricing model and the firm’s systematic risk? (Select from the drop-down menu.) Sugita’s historical average retum is the return based on the capital asset pricing model and the firm’s systematic risk. greater than less than

(Related to Checkpoint 8.3) (CAPM and expected returns) a. Given the following holding-period retuns, EB, compute the averace returns and the standard deviations for the Sugita Corporation and for the market. f Sugita’s beta is 1.46 and the risk-free rate is 9 percent, what would be an expected return for an investor owning Sugita? (Note: Because the preceding returns a them comparable with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) c. How does Sugita’s historical average retun compare with the return you should expect based on the Capital Asset Pricing Model and the firm’s sysstematic risk? e based on monthly data, you will need to annualize the returns make % . (Round a. Given the holding-period returns shown in the table, the average monthly return for the Sugita Corporation is three decimal places.) The standard deviation for the Sugita Corporation is%. (Round to two decimal places.) Given the holding-period retums shown in the table, the average monthly return for the market is %. (Round to three decimal places.) The standard deviation for the market is%. (Round to two decimal places.) b. If Sugita’s beta is 1.46 and the risk-free rate is 9 percent, the expected return an investor owning Sugita is%. (Round to two decimal places.) The average annual historical return for Sugita is%. (Round to two decimal places.) c. How does Sugita’s historical average retun compare with the return you should expect based on the capital asset pricing model and the firm’s systematic risk? (Select from the drop-down menu.) Sugita’s historical average retum is the return based on the capital asset pricing model and the firm’s systematic risk. greater than less than Sugita Corp Month Market 1 2.2% 1.8% 2 -0.8 2.0 3 0.0 1.0 4 0.0 0.0 7,0 5.0 6 7,0 1.0 N L CO

(Security market line) You are considering the construction of a portfolio comprised of equal investments in each of four different stocks. The betas for each stock are found below Asset Beta 2.40 1.05 0.45 -1.80 a. What is the portfolio beta for your proposed investment portfolio? b. How would a 25 percent increase in the expected return on the market impact the expected retum of your portfolio? ud a a se ne expected r market impact the ex ton s wbich stock would you decrease and which would you increase? Why? ‘your portfolio by changing your rtfolio allo you are a. The portfolio beta for your proposed investment portfolio is(Round to three decimal places.) by % b. A 25% increase in the expected return on the market will cause the expected return of your portfolio to (Select from the drop-down menu and round the answer to two decimal places.) c. A 25% decrease in the expected return on the market will have the following impact on the expected re increase by . (Select from the drop-down menu and round the answer to two decim Asset A would decrease by %. (Select from the drop-down menu and round the answer to two decimal places.) Asset B would by . (Select from the drop-down menu and round the answer to two decimal places.) Asset C would by . ( Select from the drop-down menu and round the answer to two decimal places.) Asset D would d. If you are interested in decreasing the beta of your portfolio by changing your portfolio allocation in two stocks, which stock would you decrease and which would you increase? Why? (Select the best choice below.) O A. You should decrease asset D and increase asset A because asset D’s beta is negative and asset A has the highest beta. O B. You should increase asset D and decrease asset A because asset D’s beta O c. You should increase asset A and decrease asset D because asset D’s beta is negative and asset A has the highest beta. O D. You should increase asset B and decrease asset C because asset B’ beta is close to 1 and asset C’s beta is the closest to zero. negative and asset A has the highest beta.

(Portfolio expected rate of return) Barry Swifter is 60 years of age and considering retirement. Barry’s retirement portfolio currently is valued at $750,000 and is allocated in Treasury bills, S

(Related to Checkpoint 8.3) (Systematic risk and expected rates of return) The following table, contains beta coefficient estimates for six firms. Calculate the expected increase in the value of each firm’s shares if the market portfolio were to increase by 10 percent. Perform the same calculation where the market drops by 10 percent. Which set of firms has the most variable volatile stock returns? Input the expected increase in the value of each firm’s shares if the market portfolio were to increase by 10 %. (Round each answer to two decimal places.) Microsoft Money Ce Company om) Expected Increase Beta Estimate Computers and Software 2.58 Apple Inc. (AAPL) Dell Inc. (DELL) 1,63 Hewlett Packard (HPQ) 1.38 Utilities American Electric Power Co. (AEP) 0.75 0.36 Duke Energy Corp. (DUK) Centerpoint Energy (CNP) 0.84 f each firm’s shares if the market portfolio were to decrease by 10%. (Round each answer to two decimal places.) Input the expected decrease in the value Microsoft Money Central (MSN.com) Beta Estimate Company Expected Decrease Computers and Software % % Apple Inc. (AAPL) 2.58 Dell Inc. (DELL) 1,63 % Hewlett Packard (HPQ) 1.38 Utilities % American Electric Power Co. (AEP) 0.75 Duke Energy Corp. (DUK) 0.36 % Centerpoint Energy (CNP) 0.84 Which set of firms has the most variable or volatile stock returns? (Select the best choice below.) O A. Utilities O B. Computer and Software firms Microsoft Money Central (MSN.com) Company Computers and Software Apple Inc. (AAPL) Dell Inc. (DELL) Hewlett Packard (HPQ) 2,58 1.63 1.38 Utilities American Electric Power Co. (AEP) Duke Energy Corp. (DUK) Centerpoint Energy (CNP) 0.75 0.36 0,84

Assignment: Write a 1-page paper A description of the basic principles of cognitive psychology and their roots in earlier psychological schools of thought that includes specific examples of concepts, ideas, and processes. Also, describe your thoughts about what positive psychology is and how it differs from traditional psychological perspectives

(Security market line) James Fromholtz is considering whether to invest in a newly formed investment fund. The fund’s investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. The fund sponsor has suggested to James that the fund’s performance will hinge on how the national economy performs in the coming year. Specifically suggested the following possible outcomes: . James has estimated the expected rate of retum from this investment is 23.00 percent. James wants to apply his recently acquired understand ing of the security market line concept to his analysis. .the nskle rale of inr ey ortod rto of rature of 11 percent What is the sione of the security market line fie the reward-to-risk ratio) this investment opportunity? c. Based on your analysis of parts a and b above, which investment should James take? Why? a. If the risk-free rate of interest is currently 2.2 percent and the beta for the investment is 2.3, the slope of the security market line 1 r the real estate mortgage security investment is %. (Round to two decimal places.) b. James is also considering the investment of his money (Round to two decimal places.) na market index fund that has an expected rate of return of 11 percent. The slope of the security market line (i…, the reward-to-risk ratio) for this investment opportunity is%. c. Based on your analysis f parts a and b above, which investment should James take? Why? (Select the best choice below. O A. The market index fund O B. Cannot be determined from the information given in this problem. O c. The real estate portfolio. State of Economy Probability Fund Returns Rapid expansion and recovery Modest growth 10% 100% 50% 40% Continued recession 30% 10% Falls into depression 10% 100%

(Security market line) If the risk-free rate f return is 5 percent and the expected rate of return on the market portfolio is 12 percent. t line (SML). Also, calcu b. Using your graph from question a, identify the expected rates of return on a portfolio with a beta of 0.50 and a beta of 1.50, respectively c. Now assume that because of a financial crisis the economy slows down and anticipated inflation drops. As a result, the risk-free rate of return drops to 3 percent and the expected rate of return on the market portfolio drops to the resulting security market line. percent. omic fears, investors have become more risk averse, demanding a higher return on all assets that have any risk. This results in an increase in the expected rate of return on the market portfolio to 17 percent expected rates of retun? (with the risk-free rate equal to 5 percent). Draw the resulting SML. What can you conclude about the effect of a financial crisis a. Assume the risk-free rate is 5 percent and the expected return on the market portfolio is 12 percent The market risk premium is%. (Round to the nearest percent.) Draw the security market line on the graph below. Note that you can click the magnifying glass button to enlarge the graph and use the Line Drawing Tool in the palette to draw the line. Security Market Line 25 20- b. Using your graph from question a, the expected rates of returm on a portfolio with a beta of 0.50 is%. (Round to the nearest whole number.) Using your araph from question a, the expected rates of retum on a portfolio witha beta of 1.50 is % (Round to the nearest whole number) Security Market Line ( % ) uunau papadx d. Now assume that because of economic fears, investors have become more risk averse, demanding a higher return on all assets that have any risk. This results in an increase in the expected rate of return on the market portfolio to 17% (with the risk-free rate staying at 5 % ) , Draw the resulting SML Note that you can click the magnifying glass button to enlarge the graph and use the Line Drawing Tool i the palette to draw the line. Security Market Line 30- 27.5 25- 22.5 20- 17.5 SML part a 15 12.5 SML part b 10- 7.5 5 Expected return (%) TTTT What can you conclude about the effect of a financial crisis on expected rates of retun? (Select the best choice below.) OA. A financial crisis can have various effects such as increasing the slope of the security market, increasing expected retuns and/or shifting the security market line down O B. the same slope, decreasing the expected returns. A financial crisis always increases the slope of the security market line and thus the required return. Afinancial crisis never changes the slope of the security market line not the required return. O C O D. Afinancial crisis always decreases the slope of the security market line and thus the required return.

The post Question: 14. More On The Time Value Of Money Aa Aa Lloyd Is A Divorce Attorney Who Practices Law In Florida. He Wants To Join The American Divorce Lawyers Association (ADLA), A Professional Organization For Divorce Attorneys. The Membership Dues For The ADLA Are $600 Per Year And Must Be Paid At The Beginning Of Each Year. For Instance, Membership Dues For The … appeared first on uniessay writers.

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November 3, 2019