Finance questions and answers in February 2021

Please solve in Excel using formula and formula text function Question 5 (based on Chapter 13) Estimate the weighted average cost of capital for Caterpillar, Inc. (ticker CAT), using the income statem...
1 ) A project has sales of $611,208, cash costs of $338,911, and depreciation expense of $74,209. The tax rate is 34 percent and the discount rate is 14 percent. What amount should be used as the depr...
1.Your investment has a 30% chance of earning a 1% rate of return, a 40% chance of earning a 11% rate of return and a 30% chance of earning -5%. What is the standard deviation on this investment? (P...
1.Which of the following are typical banker's acceptance maturity lengths? Check all that apply. -1 day -2 weeks -135 days -225 days 2.Which of the following are properties of banker's acceptances? ...
Everything else equal, which of the following conditions will result in the  lowest  present value of $100 to be received in three years? A. annual compounding B. quarterly compounding C. monthly co...
1.    What steps should you take prior to making a purchase? 2.    What steps should you take while making a purchase? 3.    What steps should you make after you make a purchase? 4.   ?...
Which of the following statements is correct? a. When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation. b. If a com...
You are considering two different payment plans for the lottery you just won. Option 1 pays $10,000 today and Option B pays $20,000 at the end of ten years. Assume you can earn 6.5 percent on your sav...
Consider the same two firms U and L - that are identical except for capital structure. Each firm expects EBIT of $650,000 each year forever. Firm U has a cost of equity of 10% and Firm L has $2 millio...
A company just paid a dividend to its common shareholders of $7.50 per share, so DIV 0  = $7.50. A newly introduced product line is expected to increase dividends by 75% for the next (or upcoming...
Using the following initial cost and cash flow figures below for Projects 1 and 2, please answer the three questions (a, b, and c).                                   ?...
Chittenden Enterprises has 634 million shares outstanding. It expects earnings at the end of the year to be $960 million. The firm's equity cost of capital is 9%. Chittenden pays out 30% of its earnin...
Two years ago, Jim bought 100 shares of IBM stock at $50 per share, and just sold them for $65 per share after receiving dividends worth $3 per share over the two year holding period. Mary, bought 5 o...
The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0820. The variance of Willow is 0.1130, and the variance of Sky Diamond is 0.1470. What is the correlation coefficient bet...
If TFSA contributions of $10,000 at the end of every year are projected to generate a plan worth $1,000,000 in 25 years, what effective rate of return was assumed in the forecast? -the book says 10.11...
1.    Duke was approved for a 30 year conventional loan for $250,000 at 3.65% fixed rate. He was also approved for a 15 year conventional loan for $250,000 at 3.45% fixed rate. He has $20,000 to p...
1. True or False? Explain. According to the CAPM, investors require a higher return to hold securities that are highly volatile. According to the CAPM, all risky assets must have positive risk premium...
1.      Agree or disagree with the following statements then discuss: a.      " Liquidity services are services that make it easier for customers to conduct financial transactions" b.  ?...
Question 1 OldBooks, a book selling company with market assets of $100M, equity beta of 1.2 and D/E=1, is considering expanding into the internet business. They have the following estimations regardin...
Under a Normal Distribution of stock returns, the following measurement of risk will  identify approximately 2/3 of all observations within one of these under the normal  distribution curve a.  var...
15. Normal retirement age means: a. An employee cannot retire with a full pension before age 60. b. The age at which an employee can received the full amount for each year of service. c. Age 65. d. Th...
14. For a defined benefit pension plan, all of the following are true except: a. Benefits might increase each year to reflect inflation. b. Benefits might be integrated with CPP retirement income. c. ...
13. Which of the following is not true? a. Before age 65, an employee must have actually retired to receive a pension. b. After age 65, an employee can receive both a pension and earned income from th...
10. Which of the following statement(s) are correct? a. Defined benefit plans can generate surpluses. b. Defined contribution plans cannot generate surpluses. c. Deferred profit sharing plans are a ty...
The spot price of the market index is $900. After 3 months the market index is priced at $920. The annual rate of interest on treasuries is 4.8% (0.4% per month). The premium on the long put, with an ...
Which of the following is true for market value accounting method? a. FIs generally report their balance sheets using this method. b. None of the options. c. Reports assets and liabilities at the orig...
Can you please explain the Economic Value Added (EVA) Interpretation of the below information. CALCULATION OF EVA - ECONOMIC VALUE ADDED     EBIT:$1,601,400.00  Less: Taxes$239,700.00  Equals: N...
ou are hoping to buy a new boat 3 years from now and you plan to save $4,200 (forty two hundred) per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% (fi...
Spielberg builds a portfolio by investing in two stocks only: Google (GOOG) and Huawei (SHE). According to the CAPM, the expected risk premium (i.e., the expected return minus the risk-free rate) of ...
You open a checking account. You are paid 3% interest on the average daily balance, but are charged a $4 monthly charge. Assuming that interest is paid monthly (regardless of the number of days in t...
John Doe Enterprises borrowed $149,500 for three years from the bank. At the end of the three years, they repaid the loan with one payment of $176,590. What was the quoted interest rate on the loan? A...
On January 1975, the Mexican peso/ US$ exchange rate was Ps12.5=$1. By January 1985, the exchange rate stood at Ps208.9=$1. By how much has the Mexican peso appreciated or depreciated against the doll...
Calls for gold standard reflect: Group of answer choices desirability of gold distrust of government to maintain the integrity of fiat money that the gold standard can be adopted by the US if there is...
Which of the following statement concerning the exchange rate regime is NOT true? Group of answer choices a. The gold standard is favored by some in conservative quarters because of its implication fo...
Which of the following is NOT a criterion to use in determining whether an industrial firm is a multinational corporation? Group of answer choices by the extent of international portfolio investments ...
A CFO of a company with a market capitalization of $1B. The firm has 132 million shares outstanding, so the shares are trading at $10.68 per share. Each existing shareholder is sent one right for ever...
Gustav Co. reported $204400 of sales, $134550 of operating costs other than depreciation, and $8040 of depreciation. The company had $33150 of outstanding bonds that carry a 6.75% interest rate, and i...
Company Detox, is a private company that designs, manufactures and distributes certain consumer products. In this fiscal year, Detox had revenues of $401M and earnings of $21M. Detox company has filed...
JJ firm issues preferred dividends at an annual rate of $3.06. Its current preferred stock price is $22.65. Assume that the equity beta for JJ is 0.93. The Yield on 10-year treasuries is 2.74%, and th...
Suppose Corporation A has a book (face) debt value of $9M, trading at 89% of face value. It also has book equity of $21 million, and 2.91 million shares of common stock trading at $20 per share. What...
Suppose Corporation A has a book (face) debt value of $9M, trading at 84% of face value. It also has book equity of $21 million, and 2.21 million shares of common stock trading at $21 per share. What...
Using the mortgage calculator  Determine the following:   Jane is going to purchase a home that is $180,000, she makes the standard down payment (20%), then she is going to obtain a mortgage for the...
Gustav's best friend, Garfield, owns a lasagna factory. Garfield's financial skills are not very strong, so he asked Gustav to take a look at his financials. Here is the information Garfield provided ...
You want to purchase a house, and you have agreed on a selling price of $230,000. The bank will give you a loan for 30 years, and the interest rate will be 3.5%. Assume that you will finance the enti...
Assume an equity market neutral portfolio (i.e., beta = 0) is constructed from a combination of one part investors' "equity" contributions and five parts leverage. This levered strategy produced a gro...
New equipment costs $675,000 and is expected to last for five years with no salvage value. During this time the company will use a 30% CCA rate. The new equipment will save $120,000 annually before ta...
6.There are both costs and benefits of using debt as part of a company's capital structure. Explain what the optimal capital structure of a company is, and give one cost and one benefit of including d...
4.Consider a 10-year $1000 bond that was issued 4-years ago. If the bond has an annual coupon rate of 6%, pays coupon semi-annually, and is currently selling for $1,027. Estimate if the yield to matur...
3.Assume that NVX Ltd. would like to raise $3,500,000 with a new issuing of bonds. Assume that the issue will have a coupon rate of 3% with a 6 years maturity. Assume this are semi-annual coupon bonds...
A supplier charges 15% interest on past-due accounts. Interest on a $700 account is $15.99. For how many days must the account have been overdue, assuming the supplier uses a 365-day year? please show...
Assume an individual makes a lump sum investment at the beginning of year one of $35,763, the present value of which is $35,763. The investor's discount rate, for an alternative safe investment, is 12...
Assume an individual makes a lump sum investment at the beginning of year one of $19,760, the present value of which is $19,760. The investor's discount rate, for an alternative safe investment, is 5....
 Jack asked Jill to marry​ him, and she has accepted under one​condition: Jack must buy her a new ​$330,000 ​Rolls-Royce Phantom. Jack currently has ​$15,490 that he may invest. He has fo...
  Triangular Chemicals has total assets of $106 ​million, a return on equity of 40 ​percent, a net profit margin of 5.2 ​percent, and an equity multiplier of 2.51. How much are the​ firm's ...
Robert has twins and anticipates a minimum need of $104,000 for college education funds in 13 years when his kids start college. How much money should Robert put in an account today? Assume that the a...
Assume that the current annual costs for your client's choice of college for this son are $29,000. Your client's son is now 4 years old and assuming he will be age 18 when beginning college. The colle...
MLC Fund Management is considering the following three (3) options for their new investment portfolio: Option 1 - A non-callable corporate bond that pays a coupon rate of 8% annually. The bond will ma...
Alice has $5 000 now. She wants to save $25 000 to buy her first car. She decides to put that $5 000 in an investment fund that pays an interest rate of 10% per annum (per year), compounding annually....
You are the CFO of Midas Mining Ltd and the company is looking to expand its mining operations. Your staff have narrowed it down to two (2) projects, with the cash flows presented in the table below. ...
A $150,000, 30-year interest-only mortgage, with a 5-year interest-only period, has an 8% interest rate, compounded monthly. During the 2nd year of the mortgage, assuming no prepayments, the required ...
The initial rate on a 30-year, 3/1 ARM is 4%. The loan has a margin of 2.5%, a 2% per year cap, and a 6% lifetime cap. At origination, the index (1-year T-Bill) is 1%. The maximum rate that can ever b...
Comparing a 4% 30 year mortgage with no points and a 3.75% 30-year mortgage with one point, if the buyer expects to remain in the house for about 4 years, then the no points mortgage is the better cho...
The down payment is $200,000 on a house with an agreed- upon price (and appraisal) of $1,200,000. Jumbo mortgage rates are 4.3% and conforming rates are 4%. If the conforming loan limit is $700,000 in...
if there is a $100,000 1st mortgage on a residential property that is current (not delinquent), and a $50,000 2nd mortgage that is seriously delinquent, should the 2nd mortgage lender foreclose if the...
Tony's son, Mark will start college in 8 years. Tuition costs $26,000 today, increasing at an annual rate of 6.1%. Tony wants to earn 8.5% annually on his investments. If he makes an initial investmen...
Charles estimated a minimum need of $229,000 for college education fund for his son in 13 years when his son will start college. Assume that after-tax rate of return that Charles is able to earn from...
A credit analyst has received a $500,000 order from a new customer. The cost of filling the order (i.e., COGS) is $20,000 and collection costs are 1% of sales. The credit analyst notes that the COGS...
Complete: Consider the following transactions: (1) CBA makes a $50m interbank loan to ANZ. (2) ANZ repays $30m to the RBA as part of the completion of a repurchase agreement of government securities m...
Now William knows that he will have 577,000 in his inheritance fund, when he will reach age sixty. He would like to know how much he could withdraw from the fund in equal installments at the end of ea...