Answer:
a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?
the expected value of our portfolio = ($120,000 x 50%) + ($300,000 x 50%) = $210,000
the current market price of the investment = $210,000 / 1.13 = $185,840.71
discount rate = 5% + 8% = 13%
b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be?
13%, it should be equal to the discount rate
c. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now?
the current market price of the investment = $210,000 / 1.21 = $175,000
discount rate = 5% + 15% = 20%
d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell?
the higher the risk premium, the lower the market price of the portfolio
The net income of Wade Corp. for the year 2020 is $808,850. This is calculated by considering income from continuing operations, the loss from discontinued operations, the profits from selling equipment, understated amortization of intangible assets, and the recurring gain. The earnings per share is $5.39, which is calculated by dividing the net income by the number of shares outstanding.
Income from Continuing Operations before Income Tax: $1,210,000
Income Tax (19%): $-229,900
Income from Continuing Operations: $980,100
Discontinued Operations: (net of tax $190,000)*(1-0.19) = $-153,900
Profit from Selling Equipment: (($40,000 - $80,000 + $30,000)*(1-.19)) = $-6,100
Understated Amortization of Intangible Assets: $-35,000 (This amount is already net of tax).
Recurring Gain: ($125,000*0.19) = $23,750 (Subtract out non-recurring part from Continuing Operations.)
Net Income: ($980,100 - $153,900 - $6,100 - $35,000 + $23,750) = $808,850
Net Income / Number of shares outstanding: $808,850 / 150,000 = $5.39 per Ordinary Share
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Answer:
just get rid of this answer
Explanation:
Answer:
1. In a Year 20,367 20,017
2. In a Year 21,333 21,917
3. In the case of NPW analysis Selected Target is best option because it is the better and cheaper investment while EUAM analysis states Walmart kit is better option,
4.Target is the best option because the cost difference is only around $600 which will last for 6 Years while in walmart case we will need to replace all the furniture in 3 Years .
Explanation:
1. Using NPW Analysis
Walmart Kit Target
Intial Cost 40000 65000
AMC 10000 12000
Salvage Value 12000 25000
Life Years 3 6
Total Cost
Intial Cost 40000 65000
Less Salvage 12000 25000
Balance 28000 40000
5% Interest 6000 19500
AMC PV 2.71 5.05
Amc 27100 60600
Total Cost 61100 120100
In a Year 20,367 20,017
2. Using EUAW Analysis
Walmart Kit
Target
Intial Cost 40000 65000
AMC 10000 12000
Salvage Value 12000 25000
Life Years 3 6
Total Cost
Intial Cost 40000 65000
Less Salvage 12000 25000
Balance 28000 40000
5% Interest 6000 19500
AMC 30000 72000
Total 64000 131500
In a Year 21,333 21,917
In the case of NPW analysis Selected Target is best option because it is the better and cheaper investment while EUAM analysis states Walmart kit is better option,
Target is the best option because the cost difference is only around $600 which will last for 6 Years while in walmart case we will need to replace all the furniture in 3 Years .
Hence Target product will be the best option we would advice the management to go for.
To determine which kitchen kit to choose, you can use NPW (Net Present Worth) analysis and EUAW (Equivalent Uniform Annual Worth) analysis. In NPW analysis, calculate the present worth of each option by subtracting the present value of the annual maintenance cost from the sum of the present value of the salvage value and the present value of the first cost. In EUAW analysis, divide the NPW by the present worth factor to calculate the equivalent uniform annual worth. You can extend the analysis to show the EUAW for an extended life of the products. Present the information ethically and transparently, addressing your bias towards the Target kit and presenting the analysis results objectively.
a. In order to determine which kitchen kit to choose using NPW analysis, we need to calculate the present worth of each option. The present worth is calculated by subtracting the present value of the annual maintenance cost from the sum of the present value of the salvage value and the present value of the first cost. You can use the formula: NPW = (-FC + PV(SV) + PV(AMC)) / (1 + i)^n, where FC is the first cost, PV(SV) is the present value of the salvage value, PV(AMC) is the present value of the annual maintenance cost, i is the interest rate, and n is the number of years.
b. To determine which kitchen kit to choose using EUAW analysis, we need to calculate the equivalent uniform annual worth of each option. The EUAW is calculated by dividing the NPW by the present worth factor. You can use the formula: EUAW = NPW / Present Worth Factor, where NPW is the net present worth, and the Present Worth Factor is calculated using the formula: Present Worth Factor = (1 - (1 + i)^-n) / i.
c. To show that the Target option is the better choice, you can extend the analysis from part b and calculate the EUAW for an extended life of the products. Simply substitute the new number of years into the formula and compare the EUAWs of the two options.
d. Since you have a bias towards the Target kit, it is important to present the information ethically and transparently. You can start by explaining your bias and personal preference, and then present the analysis results objectively, showcasing the financial aspects and consequences of each option. It is crucial to provide all the necessary information and allow management to make an informed decision based on the facts presented.
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Answer:
$1,280 million
Explanation:
The change between the opening inventory balance and the ending inventory balance for a period is as a result of the purchases of inventory and the sale of inventory during the period.
All of these elements are related as;
Opening inventory + purchases - cost of goods sold = ending inventory
As such, to estimate the merchandise inventory purchased,
let the purchase for the period be T
1500 + T - 880 = 1900 (All amounts in millions of $)
T = 1900 + 880 - 1500
= 1280
The merchandise purchases for the third quarter is $1,280 million.
phenomena is associated with high
unemployment?
A. Economic Growth
B. Economic Stability
C. Economic Depression
Answer:
C. Economic Depression
Explanation:
Economic Depression is when an economy goes into financial turmoil/ struggles.
A. $20,000
B. $15,060
C. $12,500
D. $10,000
Answer: $15,060
Explanation:
From the question, we are informed that Ben and Jerry were shareholders of Water Ice Inc., an S corp. On Jan. 1, 1998, Ben owned 40 shares and Jerry owned 60 shares.
We are further told that Ben sold his shares to Joe for $10,000 on March 31, 1998 and that the corp. reported a $50,000 loss at the end of 1998. The loss that will be allocated to Joe will be:
= $50,000 × 40% × 9/12
= $50,000 × 0.4 × 0.75
= $15,000
The closest figure we have close to that is $15,060 which is option B
Rating
Default Risk Premium
U.S. Treasury —
AAA 0.60%
AA 0.80%
A 1.05%
BBB 1.45%
National Transmissions Corp. issues thirteen-year, AA-rated bonds. What is the yield on one of these bonds? (Hint: Disregard cross-product terms; that is, if averaging is required, use an arithmetic average.)
10.58%
11.78%
6.00%
2. Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true?
A) The yield on a AAA-rated bond will be lower than the yield on a AA-rated bond.
B) The yield on a AAA-rated bond will be higher than the yield on a BB-rated bond.
Answer:
Answer for the question:
"1. The real risk-free rate (r*) is 2.80% and is expected to remain constant into the future. Inflation is expected to be 6.80% per year for each of the next two years and 5.60% thereafter.
The maturity risk premium (MRP) is determined from the formula: 0.10 x (t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all National Transmissions Corp.’s bonds is 1.20%. The following table shows the current relationship between bond ratings and default risk premiums (DRP):
Rating
Default Risk Premium
U.S. Treasury —
AAA 0.60%
AA 0.80%
A 1.05%
BBB 1.45%
National Transmissions Corp. issues thirteen-year, AA-rated bonds. What is the yield on one of these bonds? (Hint: Disregard cross-product terms; that is, if averaging is required, use an arithmetic average.)
10.58%
11.78%
6.00%
2. Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true?
A) The yield on a AAA-rated bond will be lower than the yield on a AA-rated bond.
B) The yield on a AAA-rated bond will be higher than the yield on a BB-rated bond."
is explained in the attachment.
Explanation:
The yield on National Transmissions Corp.'s thirteen-year, AA-rated bond is 12.20%. Additionally, a AAA-rated bond will have a lower yield than a AA-rated bond due to lower default risk.
To calculate the yield on the bond, we take into account the real risk-free rate (r*), the inflation rate, the default risk premium (DRP), the maturity risk premium (MRP), and the liquidity premium (LP). Note that the inflation rate is given for two different periods, so we take the average of the two (6.80% and 5.60%).
The formula to calculate yield is: r = r* + Inflation rate + MRP + DRP + LP
Hence, the yield on the bond = 2.80% + 6.20% + 1.20% + 0.80% + 1.20% = 12.20%.
For part 2 of the question, the statement A) is correct. The yield of a AAA-rated bond will be lower than that of a AA-rated bond because the default risk of AAA-rated bond is less, hence a lower default risk premium is required.
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