QUESTION If a companys board of directors wants management to maximize shareholder wealth, should the CEOs compensation be set as a fixed dollar amount, or should the compensation depend on how well the firm performs? If it is to be based on performance, how should performance be measured? Would it be easier to measure performance […]
QUESTION On June 10, Lipizzaner Crab Shack purchased $6,000 of merchandise from Bristol Company FOB shipping point, terms 2/10, n/30. Lipizzaner pays the freight costs of $400 on June 11. Damaged goods totaling $300 are returned to Bristol for credit on June 12. The scrap value of these goods is $150. On June 19, Lipizzaner […]
QUESTION Your investment portfolio consists of $15,000 invested in only one stock-Microsoft. Suppose the risk-free rate is 5%, Microsoft stock has an expected return of 12% and a volatility of 40%, and the market portfolio has an expected return of 10% and a volatility of 18%.Under the CAPM assumptions,a. What alternative investment has the lowest […]
QUESTION For Neo Understanding break-even relationships. Easy writer manufactures an erasable ballpoint pen, which sells for $1.75 per unt. Management recently finished analyzing th results of he companys operations for the current month. At a break-even point of 40,000 units, the companys total variable costs are $50,000 and its total fixed costs amount to $20,000. […]
QUESTION Calculating Life Expectancy. Determine the average numbers of additional years black males alive at age 35 may expect to live. The expected number of years of life remaining at a given age denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular […]
QUESTION If another Austin Powers movie had been released in 2007, and Dr. Evil, now armed with a financial calculator, wants to hold the Earth ransom for $7,039,988.71, what inflation rate would Dr. Evil use to make his ransom equivalent to $1 Million in 1967 (Hint: Inflation is compounded on an annual basis). Round to […]
QUESTION In 2010, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larrys Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 […]
QUESTION Q1.)Precision Engineers Ltd. Is considering a proposal to replace one of its machines. The following data is available regarding the same: a. The machine was purchased 4 years ago for Rs.15 lacs and has been depreciated at 25% p.a. as per the WDV method. The machine has a remaining life of 5 years, after […]
QUESTION You have a cash obligation of $132,240 to be made at the end of year 5. Show how youcan use coupon bonds with a coupon rate of 8%, a face value of $1,000, a maturitydate at the end of year 6, and a yield to maturity of 8% to ensure that you can meetyour […]
QUESTION TPI is considering a $10 million debt issue with a coupon rate of 8%. Assuming that the expansion causes a cash flow increase to $8 million, calculate how this debt issue affects the debt-to-equity ratio, the EPS, dividend per share. Next, calculate the EPS and dividend per share while assuming that the expansion is […]
