Corporate Finance Since roughly the mid-1980’s, the cumulative performance of a Small Minus Big portfolio has been roughly zero. Does this mean the Fama & French three-factor model is theoretically incorrect?
Q: Currency Exchange Rates Custom Shutters, Inc., manufactures plantation shutters according to…
A: Custom Shutters Currency Exchange Analysis1. Expected Francs and Yen on October 1 (Spot Rate):Swiss…
Q: Vijay
A: Let's take a closer look at the computations of the portfolio's expected return and variance. a. The…
Q: None
A: Step 1:Income Replacement: Estimate the present value of the income that the working spouse would…
Q: You observe that the inflation rate in the USA is 2 percent per year and that T-bills curently yeild…
A: 1. Calculating Inflation Rate for AustraliaGiven:- U.S. inflation rate (i_e) = 2.0%- U.S. nominal…
Q: Raghubhai
A:
Q: suppose you buy an non-dividend paying asset at $50 and sell a 6 month futures contract at $53. What…
A: When there is an agreement between the two parties to trade the selected lot size of an asset at a…
Q: please fix and given me the accurate answer
A: Now, let's take a closer look at the calculations. a. Net cash flow in Year 0: Initial investments…
Q: Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a…
A: Step 1:In thisPar value = $1000One-year interest rates = 8%Callable value = $1,255 If interest rates…
Q: A highway contractor is considering buying a new trench excavator that costs $130000 and can dig a…
A: Part 2: Explanation:Step 1: Calculate the annual revenue generated by the excavator:The excavator is…
Q: Vijay
A: Approach to solving the question:1. Calculate FCFF for each year using the provided financial data…
Q: Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84. Required: The…
A: 4. To calculate the put value, we first need to determine the call value for each possible stock…
Q: Your company rose in the Series A funding round EUR 6 million with a pre money valuation of EUR 7…
A: The Series A, B, and C funding refers to the funding rounds that the company undertakes to raise…
Q: Create an Excel spreadsheet that calculates the internal rate of return for the following set of…
A: Steps:Enter the periods in column A (A2:A7).Enter the cashflows in column B (B2:B7).In cell C1,…
Q: Lisa Anderson deposits $3,400 in her bank today. a. ง If the bank pays 4 percent interest per year…
A: Step 1: Given Value for Calculation Present Value = pv = $3400Interest Rate = r = 4%Time = t = 5…
Q: 1) In a one-period binomial model, assume that the current stock price is $100, and that it will…
A: The objective of these questions is to calculate the price of a call and put option using the…
Q: Q2. Complete the amortization schedule for the last three payments on a $500,000, 15-year,…
A: Here's the corrected amortization schedule for the last three payments:End of MonthBeginning…
Q: Required information Skip to question [The following information applies to the questions displayed…
A: "11 VEL SAL" doesn't seem to correspond to any recognizable phrase in English. It might be a code or…
Q: please answer both correctly:
A: Part 2: Explanation:Step 1: Calculate annual depreciation expenseFor both projects, since the fixed…
Q: . Portfolio Risk Each of two independent projects has a probability 0.98 of a loss of $1 million,…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Someone asked, in the case of bank failures, does the FDIC always give the depositor $250,000? Or…
A: FDIC is deposit insurance company of USA main objective of FDIC is to ensure safety of the funds of…
Q: Problem 4-7 (Algo) Sales projections [LO4-2] Dodge Ball Bearings had sales of 10,000 units at $70…
A:
Q: None
A:
Q: You are holding call options on a stock. The stock’s beta is 0.65, and you are concerned that the…
A: To hedge your market exposure given the current situation, you can use the concept of beta hedging.…
Q: None
A: Step 1:Net present value method of NPV is very useful method of capital budgeting. It tells us what…
Q: What effective interest rate will Frankie have to earn if his investments of $2,000 at the end of…
A: Calculate the effective interest rate using Excel as follows:Formula sheet:Notes:To understand the…
Q: None
A: Part 2: Explanation:Step 1: Generating random normal variables is crucial for simulating the…
Q: You have the following two mortgage choices on the table attached. Please show how to calculate teh…
A: Step 1:To calculate the APR for each mortgage choice using Excel:Fixed-rate Mortgage:Calculate…
Q: Should the company replace an old machine based on this information? Accurately calculate the Net…
A:
Q: Nikul
A: Step 1: The calculation of the debt-equity ratio AB1WACC8.40%2Cost of equity11%3Pretax cost of…
Q: Linksys is considering the development of a wireless home networking appliance, called HomeNet, that…
A: Step 1: Identify the Opportunity CostLinksys has the option to rent out the warehouse space for…
Q: PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $105…
A: Step 1:a)New asset cost = 240Old asset book value = 105 - (2*(105-10)/5) = 67After tax profit on old…
Q: The bid ask bounce (a) Is where prices rise after good news (b) Is the difference between the…
A: The difference between a dealer's willing price to buy (the bid price) and their willing price to…
Q: NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year…
A: Operating cash flow in year 1 = $345,625 (357,250 - 11,625)ABCD 1Year 0 1 2Units…
Q: A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million…
A: 1.2.Cross Over rate=12%3.Cross over: 11.5%
Q: Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain…
A: Monthly Rate Equivalent to a 13% Annual RateTo find the monthly rate equivalent to an effective…
Q: Question 1 Share value, stock value and equity value are synonymous terms. options: True False
A: The objective of the question is to understand whether the terms 'share value', 'stock value' and…
Q: Nikul
A: Note 1:Calculation of Project NPV using 10 % os sales as working capital…
Q: Nikulbhai
A: The objective of this question is to calculate the variance of a portfolio with equal investments in…
Q: Bhuptbhai
A: Step 1 To calculate the bid price, we need to determine the total cost of producing and delivering…
Q: Vijay
A: Calculate the after-tax salvage value of the land in four years:…
Q: What are the additional funds needed in Year 3? a. -$225.363 million b. $63.243 million C. $125.363…
A: AFN stands for Additional Funds Needed, which is a financial metric used to determine the amount of…
Q: None
A: Let's talk more in-depth about the points you raised: 16. Spare Parts Inventory: Opulent Oceans…
Q: Bhupatbhai
A: Calculate Expected Profit for Next Year: The expected profit is given by the profit margin…
Q: please answer both questions fully.
A: Evaluating Silicon Wafer Milling Machines:Techron I:Annual Depreciation = (Cost - Salvage Value) /…
Q: For problem 2, use the following information: Consider 3-month options with premium Strike 35 Call…
A: Option Strategies Analysis:We'll analyze the payoff functions, profit diagrams, and key…
Q: Sexton Corporation has projected the following sales for the coming year: Sales Q1 $ 300 Q2 Q3 Q4 $…
A: A. Pays immediatelyThe payables period in this case Is 0. For the main reason that the company pays…
Q: None
A: (b) Minimum Acceptable Rate of Return (10%)Comparison:After-Tax Cost of Money (4.8%) < Minimum…
Q: What is the MIRR of Project PayoffSoon at a WACC of 11.786%? What is the PI of Project PayoffSoon at…
A:
Q: 6. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 50 with…
A: Part 2: Explanation:Step 1: Generating Trajectories of Geometric Brownian MotionIn this step, we use…
Q: None
A: The first homeowner with the fixed rate mortgage paid less in interest over the 10 years.Here's…
Since roughly the mid-1980’s, the cumulative performance of a Small Minus Big portfolio has been roughly zero. Does this mean the Fama & French three-factor model is theoretically incorrect?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- DAS Co. is preparing its financial forecast for next year and its AFN is negative. This means that Select one: O a. the predicted change in total assets must be negative. O b. sales growth must be negative. O c. the dividend payout ratio must be greater than the predicted growth rate in sales. O d. the predicted change in spontaneous liabilities must be greater than the predicted change in total assets.Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% •Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.Kyma Inc. currently has zero debt. It is a zero growth company, and it has the data shown below. Now the company is considering using some debt, moving to the new debt/assets ratio indicated below. The money raised would be used to repurchase stock at the current price. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, by how much would the WACC change, i.e., what is WACCold - WACCNew? New Debt/Assets 35% Orig. cost of equity, rs 10.0% New Equity/Assets 65% New cost of equity = rs 11.0% Interest rate new = rd 7.0% Tax rate 40.0% O1.72% O2.06% 1.38% 1.04%
- Suppose that the yield of bonds issued by firms XYZ decreased. Which of the following the scenario is the LEAST likely one to have caused this decrease? 1(a) The firm's credit rating went up. (b) The firm's collateral value went up. (c) Investors’ demand for assets went up. (d) A lot of other firms started to issue bonds.Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orange Inc. Returns (RB) Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.Which of the following variables do Fama and French claim do a better job explaining stock returns than beta? 1. Book-to-market ratio, II. Unexpected change in industrial production, III. Firm size O a. I and II only Ob. I and Ill only OC. I, II, and III O d. I only Not yet answered
- Which one of the following statements is true? Market crashes tend to be accompanied by low market volume. The Asian market crash was followed by a quick recovery. The market crashes of 1929 and 1987 are very similar in both the percentage decline in market value and in the ensuing market recovery. Market crashes tend to follow market bubbles. Market bubbles and crashes prove that financial markets are inefficient.which of the following is an example of unsystematic risk? decrease income tax for all company soft tech won a new sales contract increase in inflammation rate deccrease in government bond rateFinance Political stability is a major factor of which one of the following? business risk inflation risk country risk exchange rate risk 2. Regarding short selling: which one of the following statements is incorrect? Dividends on any stock sold short must be covered by the short seller. There is no time limit on a short sale. Short sales are permitted only on falling prices or a downtick. Short sellers must put up margin as if they had gone long.
- Which one of the following statements is correct? A- Stock prices are independent of the economic cycle B- Stock prices chane simultaneoustly with the economy C- Stock prices often start to rise before the end of a recession D- Changes in stock prices generally lag changes in the economyWhich of the following assumptions are necessary for AFN equation to work? 1) The ratios A0/S and LO/S, the profit margin, and payout ratio are stable. 2) Common stock and long-term debt are tied directly to sales. 3) None of the firm's ratios will change. 4) Fixed assets, but not current assets, are tied directly to sales. 5) Last year's total assets were not optimal for last year's sales.Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required rates of return. Explain carefully how and why a decline in the required rate of return affects stock values and returns.