Answer:
Amount invested (P) = $18,065 (Approx)
Explanation:
Given:
Total amount need (A) = $25,500
Number of year (n) = 4
Rate of interest (r) = 9% = 0.09
Find:
Amount invested (P)
Computation:
A = P(1+r)ⁿ
25,500 = P(1+0.09)⁴
25,500 = P(1.41158161)
P = 18,064.8429
Amount invested (P) = $18,065 (Approx)
Answer:
5.56%
Explanation:
Computation for holding-period return
Using this formula
Holding-period return =(Stock sales- Purchased Share + Dividend)/Purchased share
Let plug in the formula
Where,
Stock sales=92
Purchased Share=90
Dividend=3
Holding-period return=(92 - 90 + 3) / 90
Holding-period return=5/90
Holding-period return=0.0556×100
Holding-period return= 5.56%
Therefore the Holding-period return will be 5.56%
a. It would take 10 years for an investor to recover his or her initial investment
b. The firm will pay a dividend of $10 per share.
c. The value of the stock will be 10 times the initial investment at the time of maturity.
d. An investor would receive 10 percent of the total earnings of the firm, at the time of liquidation
Answer:
1. Measure of the percentage change in earnings before interest and tax or operating cash flow:
B) Degree of operating leverage
2. P/E Ratio of 10 indicates that:
c. The value of the stock will be 10 times the initial investment at the time of maturity.
Explanation:
Company B's degree of operating leverage is the financial measure that shows the degree of change of the operating income of the company in relation to a change in her sales revenue. With this measure, investors and analysts of Company B are able to evaluate how sales impacts the company's operating income. There are many ways to measure a company's degree of operating leverage. One of the methods subtracts the variable costs of sales and divides that number by sales minus variable costs and fixed costs.
Company A's P/E ratio or price/earnings ratio is the measure of the relationship between the current market price and its earnings per share. It is used to evaluate the value of the company's stock. It points out whether the company's stock is undervalued, overvalued, or correctly valued.
Which of the following explains the decrease in the annual rate of return on the Risky Investment bond?
1. The expected default rate on the Risky Investment bond has decreased.
2. The expected default rate on the Treasury bond has increased.
3. The expected default rate on the Treasury bond has decreased.
4. The expected default rate on the Risky Investment bond has increased.
Answer:
a. The risk premium on Risky Investment bond = 5.8
b. Such a change would decrease/reduce 4.2%
c. The expected default rate on the Risky Investment bond has decreased (1).
Explanation:
a. The risk premium on a risky investment is equal to the total return on a risky investment less the return on the risk free asset. The risky asset here gives an annual return of 7.1% while the risk free rate is 1.3%. So, the risk premium on the risky asset for additional risk is,
b. A reduction in the annual return on the risky asset will decrease/reduce the interest rate spread which is equal to the difference between the return of the risky and risk free asset. The new spread will be equal to,
c. The risk free rate is expected to be the same as no information is provided. Besides, a fall in annual rate of risky investment means that there is a reduction in the riskiness of such an investment and that would mean that there is a reduction in the default risk in turn leading to a reduction in compensation for default and the default rate.
The risk is made up of risk free + maturity risk + liquidity risk and default risk.
Answer:
The demand curve for wine shifts to the right
Explanation:
As per the forecast, there should be a decline in grape harvest. This induces the buyers to purchase more quantity of grapes in an anticipation of decline in future harvest which would eventually make grapes costlier than now.
Production of wine depends upon the availability of inputs. Grape being one of the necessary inputs. This means if in future, price of grapes rise, the production of wine would be costlier, which would raise the price of wine.
As a consequence of such an announcement, the wine market would experience an immediate increase in demand for wine which would shift the demand curve to the right.
Answer:
14.06%
Explanation:
The computation of the cost of common equity using the DCF method is shown below:
Cost of Common Equity = [Ending year dividend ÷ Price per share] + growth rate
= [$2.31 ÷ $25.50] + 0.05
= 14.06%
We simply applied the above formula by considering the ending year dividend, price and the growth rate so that the correct percentage could come
Sales data is available for the first seven years (See below). As part of your analysis on the outlook for this industry:
a) How would you characterize the future for tablets? Are consumers crazy about this technology or are luke warm?
b) Prepare a five year forecast for this industry; has the market reached its peak (please identify the demand peak).
Please use the Bass Model Estimator provided. Use the spreadsheet tab called "Analysis Report"
Please clearly provide market size assumptions and justifications.
Year Annual Sales (Units Sold)
2010 3,000,000
2011 10,000,000
2012 25,000,000
2013 34,000,000
2014 39,000,000
2015 45,000,000
2016 51,000,000
Answer:
a) According to the published sales statistics, it appears that the initial release of tablets in 2010 was warmly accepted by customers, since sales increased quickly in the years that followed. With only a 13% rise in revenue from 2015 to 2016, the rate of growth has slowed recently. This shows that customer enthusiasm for the technology may be waning.
b) We will utilize the Bass Model Estimator available on the "Analysis Report" page to project sales over the following five years. The "coefficient of innovation" (p) of this model accounts for the number of customers who have embraced the technology as well as the number of potential consumers who have not yet adopted the technology but may be persuaded to do so.
Explanation: