Finance questions and answers in October 2021

Question 2 (from 2010 session 1 Exam) [10 marks] A 6 month European call option on a share in ABC Ltd has an exercise price of $20. The current share price for ABC Ltd is $18.50. After 6 months, the s...
1. Aegean Cruises issues only common stock and coupon bonds. It has a debt-equity ratio of 2. The cost of the equity is 14% while the pretax cost of debt is 6.5%. What is the WACC of Aegean if its tax...
Five years ago, Sportify Inc. issued a 20-year bond with an annual coupon rate of 12% to finance its $60 million oversea expansion (assume coupons are paid annually in this question). Because of the d...
I work for firm XYZ situated in Britain, and my boss has become concerned about the current economic environment, especially as it is related to the different types of exposures that my firm may face ...
Due to the adoption of a just in time assembly line system, NWC is expected to decrease. Inventory is expected to decrease from $254600 to $170144 while accounts payable will also decrease by $31880. ...
You have three stocks in your portfolio with the following properties:   Stock Portfolio Weight Expected Return Variance Correlation With A Correlation With B Correlation With C A 20 percent 5 percen...
  True or False - A breakout occurs when a stock's price moves up quickly above a former support line?   True   False True or False - Technical Analysis is for day trading?   True   False What do...
Two years ago, Sanjay purchased 2,500 units in a Canadian start-up company called Here We Go Inc. for $15,000. On October 22, 2021, he sold 1,250 shares when they hit $18.50/share and incurred a large...
 MBC Inc. just paid a dividend of $8.00 per share but plans to pay $2.00 per share every quarter from the next quarter up till the last quarter of year 7, after which the dividends will be paid $2.50...
The term "Derivative" means that the price of a derivative contract is derived from the price of the commodity or  financial instrument in the physical market. Select one: True False       In the ...
Which of the following factors is true when considering a 48-month loan at 6% APR and a 36-month loan at 5% APR?   You will pay less in total for the longer-term loan. You will pay less interest for ...
You get a mortgage loan on May 4 and are required to deposit $855 into the escrow account at that time. Your first payment is due June 1, in the amount of $1,844.23 ($1,644.23 PI + $200 TI). The lende...
1)Harrison invests $10,000 in an account that pays 5% simple interest. How much more could he have earned over a 7-year period if the interest had compounded annually? Which one is likely to be used ...
Paul is planning a four-week trip to Europe and is deciding what type of health care coverage he may require in addition to his basic provincial health plan. He has compiled the following list of cons...
Nelly purchased a 10-year guaranteed renewable term life insurance policy in 2000, with a face amount of $500,000. Her initial premium was set at $1,000 annually. When Nelly's policy renews after the ...
With regards to group life insurance, which of the following statements are true? 1. An individual employee does not typically have the freedom to select a specific amount of insurance coverage, but r...
Megan owns a universal life (UL) policy with guaranteed mortality rates. The illustration provided indicates that, if she continues paying her planned premiums for 20 years, and if the returns are at ...
Sixty-six-year-old John, a widower, wants to purchase insurance that will cover the tax consequences of any capital gain that arises from his non-registered investment portfolio and his real estate ho...
Ken and Amanda, a married couple who are both age 56, each own a 10-year term life insurance policy that is convertible up to age 70. The policies were purchased in 1990 when their three children were...
en years ago, John purchased a universal life insurance policy that has a face value of $1,000,000 and a current cash surrender value of $22,000. There is currently no policy loan outstanding. The ann...
How much life insurance is required for a family whose primary wage earner currently has a term policy with a death benefit of $200,000? The annual ongoing income requirement for the family is $50,000...
Fiona is considering a career in the insurance industry in Canada. Which of the following statements about the industry is not true ?     A. An underwriter assesses risk and an actuary prices risk ...
Tom's house was destroyed by a fire, which the fire department believe was caused by a candle left unattended in the kitchen. The peril in this case is the:     A. The house     B. Tom's absence ?...
A superfund manager currently manages a diversified Australian shares portfolio with a value of $300 million. The manager decides to use the ASX SPI 200 index futures to hedge a forecasted decline in ...
A company based in U.S. is expected to make a payment to a client in 3 months in the amount of 1,000,000 euros. To do so, it plans to acquire euros in 3 months on the spot market. Current exchange rat...
Problem 3: You are an arbitrageur working for Century Arb hedge fund. At 10:30 AM you are observing the following prices/rates. A European put option of XYZ Corp. maturing in 3 months with the strike ...
Cheryl is very interested in learning about the flexibility of the various non-qualified benefits she is receiving, especially after being severely limited in how much she could contribute to her reti...
Code Consulting offers an "Excess SERP". What would be the unique feature in the design of this plan?   A. Will allow for deferral of compensation in excess of an employee-established base level   ?...
QUESTION 46   Which of the following types of funds would be most appropriate as an investment option for an employer-sponsored defined contribution plan with participant-directed investments? Divers...
QUESTION 35   The Coldest Brew coffee company established a non-qualified deferred compensation plan several years ago. Each year, three top executives defer a portion of compensation to the plan. In...
QUESTION 32   A recently retired 65-year-old client has requested to withdraw $10,000 from his only traditional IRA account. The account, which currently has a balance of $500,000, was funded in part...
QUESTION 26   Which of the following types of insurance should be addressed in a comprehensive retirement plan:     A. Umbrella liability insurance     B. Health insurance     C. Disability ins...
QUESTION 19   You are designing a benefits package for a top-level executive and are seeking additional ways of providing tax-deferred benefits. Which of the following benefits would meet this need? ...
47) Todd expresses a concern at one point in the conversation that if he makes a substantial employer contribution, his younger employees may simply withdraw the money immediately. What possible measu...
46) In considering a 401(k) plan, which of the following statements regarding a plan for the Prudential Roofing Co. is NOT correct? If Prudential wants employees to save for their own retirement, the ...
45) If Cliff Jordon and Bill Reese want to install a plan that provides maximum benefit for themselves with the most modest contributions for other employees, which of the following plans would work b...
43) Which one of the following statements support the decision to select a Target Benefit Plan for Prudential Corp.?   A. Annual contributions are flexible and there is no commitment for any annual c...
QUESTION 42   Richard, age 55, is a client of yours who is looking for a new job. He is very interested in finding a company that offers a retirement plan and would like to know which type of plan wo...
QUESTION 33   Joe Paulo has decided to retire at his full retirement age. His monthly benefit will be $1,612. He married later in life, starting his family at age 52. Joe's wife, Donna is 58. They ha...
QUESTION 32   Which of the following constitutes a welfare benefit plan covered by ERISA regulations?     A. Benefits provided in the event of sickness, accident, or disability     B. Unemploymen...
QUESTION 31   All of the following are correct statements concerning the Cash Reserve Account strategy EXCEPT:     A. The amount of the case reserve should be equivalent to 1-3 years of required an...
QUESTION 30   All of the following types of executive loans are exempt from below-market rate loan tax treatment EXCEPT:     A. Loans with no significant tax effect on lender or borrower     B. L...
QUESTION 24   Which of the following topics should be discussed with a younger client just beginning to save for retirement? Purchasing long term care insurance Reviewing health insurance coverage Co...
QUESTION 22   Which of the following is NOT an ERISA provision from which a properly designed non-qualified deferred compensation plan may be exempt?     A. Coverage requirements     B. Required ...
All of the following would be considered highly compensated employees in in 2021 EXCEPT:     A. Margaret, a six percent owner with annual compensation of $125,000     B. Ben, an employee with annu...
QUESTION 19   Qualified accounts being left to named beneficiaries may be subject to which of the following taxes? State Estate Tax State Income Tax Federal Income Tax Federal Estate Tax     A. II ...
QUESTION 18   When and how is an employee taxed on the bargain element of a non-qualified stock option:     A. Capital gains at time of vest     B. Ordinary income at time of vest     C. Capita...
Which of the following are characteristic of a defined contribution plan? Investment risk in defined contribution plans need not be assumed by the business Employer contributions, employee contributio...
A junior planner working for you is preparing cash flow projections for a senior HR manager earning $160,000 per year in W-2 income. Your junior planner shows a draft projection listing FICA taxes for...
Lori followed your advice and delayed receipt of Social Security retirement benefits to age 70, increasing her benefit amount from her FRA benefit of $1,850 per month to $2,442 per month. Her husband,...
Under which of the following conditions will an employee be able to exclude the value of key employee life insurance from his or her taxable income?   A. When the employee does not own shares of stoc...
1. Jana just found out that she is going to receive an end-of-year bonus of $61,600. She is in the 35 percent marginal tax bracket. Calculate her income tax on this bonus. Now assume that instead of r...
28) Calculate the operating cash flow for Corrections Corporation of America. (Assume that depreciation is tax deductible.)   Corrections Corporation of America Income Statement ($000's) Revenue $1,5...
Courses > Financial Management II - Fall 2021 (BU393) > Intro homework Chapter 17.1, 17.2 & 17.3 Full Screen Accessibility Analysts expect Evergro Inc. to generate free cash flow of $160 mil...
Accessibility Use the information in the table to calculate the change in net working capital for Wayne Enterprises in Year 2. Selected Financial Information Wayne Enterprises ($000s) Year 1 Year 2 Ca...
What is the ratio of growth CAPEX to the change in sales for The Lone Star Brewing Co. in Year 3? Lone Star Brewing Co. Selected Financial Information Year 2 Year 3 Revenue $61,709,316 $69, 114,434 De...
La Full Screen Accessibility What is maintenance CAPEX for The Lone Star Brewing Co. in Year 4? The depreciation rate is 12. 16%. Lone Star Brewing Co. Selected Financial Information Year 3 Year 4 Rev...
57 Full Screen Accessibility Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a new children's toy. The machine will increase EBIT...
Full Screen Accessibility Bill Sharpe, owner of Sharper Knives Inc., is closing his business at the end of the current fiscal year. His sole asset, the knife- sharpening machine, is four years old. Th...
Full Screen Accessibility The Sopwith Aviation Company is considering building a new short-range commuter jet, code named 'Sky Streak.' The aircraft's engines will be powered by a new green energy sou...
Assume an investment costing $24,869 will earn $10,000 a year for 10 years. If the discount rate is 10%, what is the discounted payback period of the project? (Include 1 decimal place, and round to th...
What single payment today would replace a payment stream of $50,000 that will be paid today, again at the end of year 1, and again at the end of year 2, if money earns 4% compounded semi-annually? Sel...
How much more would an investment of $5000 be worth after 5 years if it was earning 10% compounded semi-annually instead of 10% compounded annually? Select one: a. $93.92 b. $90.92 c. $91.92 d. $92.92...
What nominal interest rate compounded quarterly would place investors in exactly the same financial position as 6.55% compounded annuallly? Select one: a. 6.71% b. 6.66% c. 6.39% d. 6.70% e. 6.44%   ...
Zack shopped around for a good interest rate to invest the prize amount that he received from an inter-college tennis competition. He narrowed down his search to two banks: Bank A was offering him 6% ...
Romba, a smart money lender, offers personal loans at an interest rate of 6% compounded annually. How much money did she lend Martha 3 years ago, if Martha owes her $45,450 today? Select one: a. $33,2...
1. Mercer Inc. reported $620 in dividends and $649 in interest expense. There is an increase of retained earnings by $404 and net new equity is $850. The tax rate is 34 percent. Revenues are $7100 and...
Please answer each question in 2 or more paragraphs:   1.4 What do you need to establish to analyse cash flow trends?   1.5 Explain the requirements for each of the following: Goods and Services Tax...
The table below provides selected financial data for the Vogon Construction Co. in Years t and H. Selected Financial Information Vogon Construction Co. Year t-1 Year t Interest Expense 49,732 151,737 ...
Builtrite stock is currently selling for $70 a share.  You purchase 100 shares using 60% margin and later the stock is selling for $52 a share.  What stock price would trigger a margin call (using 2...
a) Bharti Airtel plans to expand its network and prepare for the launch of 5G services. The board hadapproved raising up to ₹21,000 crore by issuing additional ordinary shares to its existing shareh...
Question 9 (1 paint) Which of the following are true? value of a firm is the difference between the value of the firm's four of the firm's debt se value of a firm is the sum of the value of the firm's...
Question # (1 point) Which of the following are true? law firm a's stock has a higher price to earnings (P/E) ratio than firm B's stock and have the same required rate of return. then firm A has highe...
-2344.11 Like Lew Attempt 1 Question 7 (1 point) A stock is expected to pay a $5 dividend 1 year from now, a $6 dividend 2 years and a $7 dividend 3 years from now. Starting with the dividend to be pa...
A firm is considering a project that costs $165,000 to start and generates $28,000/year in after-tax cash for the next 8 years. After 8 years there are no additional cash flows or salvage value. The f...
Intertrobe common stock paid dividends of $3.53 per share over the most recent 12 months. The consensus expected growth rate of dividends among investment analysts is 2% per year.  If the discount ra...
Your client wishes you to investigate a biotechnology company with the following balance sheet and details (below):  Notes: The company's bank has advised that the interest rate on any new debt finan...
You are a financial planner, and your clients are Samantha (age 64) and Luther (age 69) Vanderbilt who reside in Georgia. Both are in excellent health. They have two children, Vladimir (age 30) and Vi...
We are Bechtel, a private US construction firm. We bid to develop the airport and the surrounding area for Thailand. We are not sure whether the Thai transportation authorities will grant us the busin...
"Herry is planning to purchase a Treasury bond with a coupon rate of 2.05% and face value of $100. The maturity date of the bond is 15 March 2033.    If Henry purchased this bond on 3 March 2020, w...
ABC borrows $13,244 at a subsidized rate of 3.6% to invest in a project. The project lasts for 10 years and ABC repays the loan at the end of the project. If ABC's cost of debt is 6.8% and the tax rat...
Henry is planning to purchase a Treasury bond with a coupon rate of 2.05% and face value of $100. The maturity date of the bond is 15 March 2033. (a) If Henry purchased this bond on 3 March 2020, wh...
Henry is planning to purchase a Treasury bond with a coupon rate of 2.05% and face value of $100. The maturity date of the bond is 15 March 2033. (a) If Henry purchased this bond on 3 March 2020, wh...
On 18 December 2019, Japfa Limited, an industrial agri-food company listed on the Singapore Exchange (SGX) announced a proposal to raise funds via a rights issue. The stock closed at $0.575 that day, ...
Suppose that you have a portfolio comprised of just two stocks (stock A and stock B). 15% of your money is in Stock A and 85% is in Stock B. Calculate the number that is closest to the  standard devi...
Question 2 - Problem Solving (10 marks) Harold and Gracie are the directors of FinanceYou Ltd, a company that specializes in helping small businesses get set up and off their feet. The company was set...
Question 1 - Short essay question (10 marks) Compare and contrast the shareholder theory and the stakeholder theory. Discuss which theory you agree with more and why. Give examples to support your dis...
Which feature do Exchange-Trade Funds (ETFs) have in common with mutual funds?   They can be traded at any time   They are tied to an index   One investment purchases a group of assets   They are ...
True or False - A company's price just increased 50% overnight. It is definitely in a Mania   TRUE   FALSE True or False - After a mania, there is always a crash that brings the stock's price back d...
  If you have two stocks, one gaining value and the other losing, what should your first reaction be?   Sell the winner to lock in profit, hold the loser until it regains value   Sell the loser and...
Any assistance would be appreciated for questions below   If you currently own a stock, the ____ is the price you would be willing to sell it for   Bid   Ask   Equilibrium   IPO What is "Total De...
1)If the inflation rates in the British pound and the US $ are 4% and 1% respectively, while the exchange rate is 1 pound exchanges for $2, what will the future spot rate be? 2) What is the meaning of...
Question 2   You would like to purchase a private condominium that costs $1.2 million, and you are shopping around for a housing loan. As this is your first housing loan, the Monetary Authority of Si...