1) For this question, refer to the second tab named “Order Book.” It contains data from a fictitious order book, which is the list of orders a clearing house has that are waiting for execution. This includes whether an order is long or short, market or limit, the limit price if applicable, and the number of shares desired. A clearing house determines a price that maximizes the number of shares that will trade. This example is designed so that the clearing price has no partial or ambiguous fulfillment.a) Find the range of prices that will clear the maximum volume of shares and the number of shares that clear at this price.b) After a market clears, the bid price is the highest price of any long bid still open. The ask price is the lowest of all the short bids still open. What are the bid and ask prices?
In 2002, the US Supreme Court ruled that cities could have school voucher programs that give money directly to parents,
In 2002, the US Supreme Court ruled that cities could have school voucher programs that give money directly to parents, who could then choose among competing schools, public or private. The idea was to create competition among schools. Like businesses, schools were expected to improve their services (how effectively they teach) to win students from competitors. The result would be improvement in all schools, private and public, to benefit many students.Do you believe economic principles, like competition, apply in both private and public organizations?
Part 1: Company J is considering a project with a 4-year lifespan. The initial cash flow estimate is $125 million
Part 1: Company J is considering a project with a 4-year lifespan. The initial cash flow estimate is $125 million in the first year increasing by $125 million in each of the years 2 through 4. To begin the project, the company will need to invest $1 billion dollars. Company J would like to cover the initial investment amount with existing internal resources and thereby not borrow. As such it remains an all-equity firm. The unlevered cost of its equity is 10%, similar to other firms in the industry sector. There will be no terminal value of significance at the end of year 4. Using the domestic APV equation below, construct a spreadsheet model to determine whether it makes sense for Company J to proceed with this project. APV=Σt=1T((OCFt)(1−τ)(1 Ku)t τDt(1 i)t τIt(1 i)t) TVT(1 Ku)T−Co Part 2:Now, imagine that Company J finances the project with $600,000,000 of debt at =8 percent. As such the company becomes a levered firm due to its acquisition of debt. What do the debt and related interest expense mean for the project if the tax rate is 40 percent? Update your spreadsheet model from above to demonstrate the effect of this debt on your decision.
Hello, can you please help me with these equations: Times Interest Earned, RNOA, and ROCE for both 2019 and 2018?
Hello, can you please help me with these equations: Times Interest Earned, RNOA, and ROCE for both 2019 and 2018? I also need to complete projected financial statements including income statements, balance sheets, and statements of cash flows (I believe for 2 years). The directions on this part state: make necessary adjustments for material non-recurring or unusual income or expenses as well as off-balance sheet assets or liabilities, among others as covered in the course. The adjustment will improve comparability and ensure accurate representation of the organization’s’ economic performance. Be sure to identify important assumptions regarding the companies, industry and business environment, and other important assumptions for estimates and forecasts, including their business strategies.All information you should need is below. For the equations, if you could tell me what value (Excel cell) you are using, that would be great.
8. More on capital structure theory The Modigliani and Miller theories are based on several unrealistic assumptions about debt financing.
Finance Assignment Writing Service8. More on capital structure theory The Modigliani and Miller theories are based on several unrealistic assumptions about debt financing. In reality, there are costs, taxes, and other factors associated with debt financing. These costs or effects have led to several theories that explain the impact of these factors on the capital structure of a firm.Based on your understanding of the trade-off theory, what kind of firms are likely to use more leverage?A. Firms with volatile earnings orB. Firms with stable earningsBased on your understanding of the capital structure theories, identify the best option for the missing part of the statement.According to signalling theory, a firm with a very positive outlook might tend to use debt financing ???? the normal target capital structure.A. BeyondorB. Equal toA leveraged buyout (LBO) helps the firm ???? both its excess cash flows and managers’ temptation to incur wasteful expenses.A. ReduceorB. IncreaseFirms that maintain an adequate reserve borrowing capacity will be able to ???? money at a reasonable cost when good investment opportunities arise.A. BorroworB. LendSeveral dominant theories try to explain why financial managers make the capital structure decisions that they do. The following statement describes one such theory.Consider this case:The firm’s debt-equity decision finds the optimal balance between the interest tax shield benefits of debt financing and the costs of financial distress associated with issuing debt.Identify which of the two theories is described by the statement.A. Trade-off theoryorB. Pecking-order hypothesis
1: The forecasts of the financial statements of a privately-owned hardware store, Swann Brothers, are given below. The company
Question 1: The forecasts of the financial statements of a privately-owned hardware store, Swann Brothers, are given below. The company is subject to a 30% tax rate Based on the forecast information, calculate the free cash flow for years 1 through 3 using both the EBIT and CFO methods. $ millons Forecast Year 0 1 2 3 Sales $100.00 $108.00 $117.70 $121.23 Cost of goods sold $65.00 $73.00 $76.51 $78.80 Selling, general and administrative expenses $15.00 $16.00 $17.66 $18.18 Depreciation $10.00 $11.00 $11.77 $12.12 Interest payment on debt $2.00 $2.50 $3.00 $3.50Current assets $10.00 $11.00 $11.77 $12.12 Current liabilities $8.00 $8.80 $9.42 $9.70Capital expenditure $5.00 $5.50 $5.89 $6.06FREE CASH FLOW Solution starts belowOther inputs needed for calculation:Variable name ValueSolution – EBIT method: Solution – CFO method:
2: The top management team of a firm purchased the company with their own personal funds and $100 million
Question 2: The top management team of a firm purchased the company with their own personal funds and $100 million borrowing. The interest on the loan was 8% and the loan is to be paid off annually by $20 million so that by the end of year 5 the loan will be fully paid off. The unlevered cost of equity for the firm is estimated at 12% and the tax rate is 35%. The free cash flows are estimated for the next five years as follows: $50 million in year 1, $55 million in year 2, $58 million in year 3, $60 million in year 4, and $65 million in year 5. The cash flow is expected to grow at 2% per year after the fifth year.Estimate the value of the firm as of year 0 using the APV valuation method. Ans: Value of Firm Solution starts below:Other inputs needed for calculationVariable name Value Calculation
1) For this question, refer to the first tab, “Price History”, which lists a fictitious set of prices for Jan
1) For this question, refer to the first tab, “Price History”, which lists a fictitious set of prices for Jan ’21 oil futures during the month of September. Recall that oil futures quotes are the per-barrel price, and one futures contract is to buy or sell 1,000 barrels of oil. The initial margin for a contract initiated on 9/1 is $6,000. The maintenance margin is 7.5% of current exposure. On a margin call, you must bring your account back to the higher of your initial or your maintenance margin. On September 25, you need to sell 100,000 barrels of oil. You decide to hedge this risk by taking a futures position that you will close out after settlement on 9/25. Assume that on 9/25 you can sell the oil for the spot settlement price that day.a) In order to hedge your oil exposure, should you take a long or short futures position? b) Suppose you order 100 futures contracts of the type specified in part (a). Assume that you purchase them after close on 9/1 at the settlement price and close them out after settlement on 9/25. Make a list of the date and amount of all margin calls that occur over the month. Assume that you can make all of the margin calls. c) On the first day of the contract, you can calculate a threshold price, where if the futures price passes that threshold a margin call will be required. What is that price? [This is trickier than you might think at first]d) Assuming you can make all of your margin calls, what is the total profit or loss made from the futures contracts? [This is easier than you might think]e) Suppose instead that after the payment of the initial margin, you did not have the liquidity to make margin calls. Instead, the clearinghouse closes out the minimum number of contracts required to keep your account active. How many contracts would you have at the end of the month? [This is probably the hardest part]f) Based on the situation outlined in part (e), what is the profit or loss from the futures strategy?g) The firm could have avoided losing the contracts by setting aside money for margin calls at initiation. What is the minimum amount that would need to have been set aside, given this set of price movements, and what would be the de facto leverage of such a strategy? [By de facto leverage, I mean: If the oil futures price were to change by 1%, by what percent would your investment change, using the amount calculated in part (g) as your initial outlay]h) What is the minimum amount that would need to be set aside to guarantee the ability to make margin calls for any set of price movements?
a. Vultures, Inc., specializes in buying assets of bankrupt companies at a discount. Vultures’ stock price seems to go up
a. Vultures, Inc., specializes in buying assets of bankrupt companies at a discount. Vultures’ stock price seems to go up whenever other companies are doing poorly and going bankrupt but goes down when other companies are doing well, and they have few bankrupt companies to prey on.High, low, or average beta?
Positive economic profits exist within an industry. Which of the following statements are true? A. There is incentive for additional
Positive economic profits exist within an industry. Which of the following statements are true? A. There is incentive for additional firms and economic resources to enter into this industry.B. Companies in the industry are earning profits and returns on investment that are above the normal level.C. Both a and bD. Neither a nor b
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