QUESTION Suppose the current spot price of wheat is $10/ bushel while the futures price for wheat with delivery date of 1 year form now is $15/ bushel. If there are no storage costs and the current one-year interest rate is 5%, construct an arbitrage that would generate profits. Suppose the current spot price of […]
Date: September 2nd, 2020
QUESTION Question #1A bond with 7yrs. to maturity and a coupon rate of 13% has a par, or face, value of $21,000. Interest is paid annually. If you require a return of 16% on this bond what is the value of this bond to you? (round answer to the nearest cent) *Answer is dollar amountQuestion […]
Date: September 2nd, 2020
QUESTION You have saved $5000 for a down payment on a new car. The largest monthly payment you can afford is $350. The loan would have a 10% APR based on the end of month payments. What is the most expensive car you could afford if you finance it for 48 months? for 60 months? […]
Date: September 2nd, 2020
QUESTION Under what conditions is the WACC the appropriate discount rate for a project? It is now generally accepted that discounted cashflow techniques for evaluating projects are far superior to the use of simple payback approaches or accounting rates of return. The shareholder value-added approach enhances these techniques further. However, to use these techniques requires […]
Date: September 2nd, 2020
QUESTION Steve and Ed are cousins who were both born on the same day, and both turned 25 today. Their grandfather began putting $2,500 per year into a trust fund for Steve on his 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estates trustee) will make40 more […]
Date: September 2nd, 2020
QUESTION There is an active, competitive leasing (i.e., rental) market for most standard types of commercial jets. Many of the planes flown by the major domestic and international airlines are not owned by them but leased for periods ranging from a few months to several years.Gamma Airlines, however, owns two long-range DC-11s just withdrawn from […]
Date: September 2nd, 2020
QUESTION 1. A firm has a common stock with a market price $55 per share and an expected dividend of $2.81 per share at the end of the coming year. The dividends paid on the outstanding stock over the past five years are as follows:Year Dividend1 $2.002 $2.143 $2.294 $2.455 $2.62The cost of the firms […]
Date: September 2nd, 2020
QUESTION Project X is very risky and has an NPV of $3 million. Project Y is very safe and has an NPV of $2.5 million. They are mutually exclusive, and project risk has been properly considered in the NPV analyses. Which project should be chosen? Explain. Project X has NPV of $ 3 Million Risky […]
Date: September 2nd, 2020
QUESTION Data for Morton Chip Company and its industry averages follow.Calculate the indicated rationsConstruct the extended DuPont equation for both Morton and the industryOutline Mortons strengths and weaknesses aas revealed by your analysisSuppose Morton had doubled its sales as well as its inventories, ¦ The ratios for Morton given the Balance Sheet and Income Statement […]
Date: September 2nd, 2020
QUESTION NPV versus IRR Bumbles Bees, Inc., has identified the following two mutually exclusive projects:a. What is the 1RR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct?b. if the required return is 11 percent, what is the NPV for each of these […]
Date: September 2nd, 2020
