Finance Assignment Help 72
a) Ted just won the lottery, and he must choose among three award options. He can elect to receive a lump sum today of $61m, to receive 10 end-of-year payments of $9.5 million, or to receive 30 end-of-year payments of $5.5 million.
i. If he thinks he can earn 7% annually, which should he choose?
ii. If he thinks he can earn 9% annually, which is the best choice?
iii. Explain how interest rates influence the award options.
b) Today is your grandmother’s 55th birthday. She plans to retire on her 65th birthday and wants to put aside the same sum of money every birthday (starting today) up to and including her 65th birthday. She then wants to be able to withdraw $10,000 every birthday (starting from her 66th) up to including her 85th birthday. She believes that an interest rate of 10% per annum is a reasonable estimate. How much does she need to put aside on each birthday?
c) You borrow $50,000 repayable in monthly instalments over 10 years. The nominal interest rate is 12% per annum. After 3 years have passed, the lender increases the interest rate to 13.5% per annum and you are given the choice of either increasing the monthly repayment or extending the term of the loan. What would be the new monthly repayment?
d) Mickey is planning to save $50,000 per quarter for 10 years. Savings will earn interest at an (nominal) interest rate of 12% per annum. Calculate the present value for this annuity if interest is compounded semi-annually.
a) Consider two 12% (coupon rate) $100 government bonds that differ only in that one matures in 2 years’ time and the other in 5 years’ time. Both bonds pay coupon annually.
i. What will be the price of each bond, given the required yield is 10% per annum?
ii. What will be the price of each bond, given the required yield is 14% per annum?
iii. Explain the price movements in response to interest rate changes as evidenced by parts (i) and (ii). (1 mark)
b) The required rate of return on the shares in the firms identified in parts (i) to (iii) is 15% per annum. Calculate the current share price in each part.
i. The current dividend per share in Firm A is $1.50, which is expected to remain constant.
ii. The current dividend per share in Firm B is 80 cents. This dividend is expected to grow at 5% per annum.
iii. Current dividend per share in Firm C is 60 cents. The dividend has been growing at 12% per annum in recent years, a rate expected to be maintained for a further 3 years. It is envisaged that the growth rate will then decline to 5% per annum and remain at that level indefinitely.
c) A major pension fund is interested in purchasing Ted’s stock. The pension fund manager has estimated Ted’s free cash flows for the next 4 years as follows: $3 million, $6 million, $10 million, and $15 million. After the 4th year, free cash flow is projected to grow at a constant 7%.
Ted’s WACC is 12%, the market value of its debt and preferred stock totals $60 million, and it has 10 million shares of common stock outstanding.
i. What is the present value of the free cash flows projected during the next 4 years?
ii. What is Ted’s total value today?
iii. What is an estimate of Ted’s price per share?
How it Works
How It works ?
Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention product code mentioned in end of every Q&A Page. You can also send us your details through our email id firstname.lastname@example.org with product code in the email body. Product code is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.
Step 2:- While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to product code . The date is asked to provide deadline.
Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id email@example.com and firstname.lastname@example.org must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.
Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.
Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.
Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.
Features for Assignment Help
We believe in providing no plagiarism work to the students. All are our works are unique and we provide Free Plagiarism report too on requests.
We believe in providing perfect, relevant and 100% accurate solutions to the student as per questions asked. All our experts are perfect in providing that so as to give unique experience to the students.
We are the only service providers boasting of providing original, relevant and accurate solutions. Our three stage quality process help students to get perfect solutions.
All our works are kept as confidential as we respect the integrity and privacy of our clients.
- Physics Assignment Help
- Chemistry Assignment Help
- Engineering Assignment Help
- Psychology Assignment Help
- Online exam Help
- Marketing Assignment Help
- Arts Assignment Help
- Sociology Assignment Help
- Project Management Assignment
- Case Study Help
- Nursing Assignment Help
- Research Assignment Help
- Operations Management Assignment help
- Accounting Assignment Help
- Biology Assignment Help
- Mathematics Assignment Help
- English Assignment Help
- Business Plan Help
- Essay Writing Help
- Human Resource Assignment Help
- Accounting Homework Help
- Computer Science Assignment Help
- Finance Assignment Help
- Economics Assignment Help
- Statistics Homework Help
- Management Assignment Help
- Strategy Management Assignment Help
- Auditing Assignment Help
- Information Management Assignment Help
- Online Assignment Writing help
- Best Assignment Help
- Humanities Assignment help
A number of capital structure theories have been introduced to show that capital structure does matter in the presence of capital market frictions and imperfections: they are the trade-off theory, pecking order theory and market timing hypothesis. Provide a concise summary on trade-off theory, pecking order theory and market timing hypothesis and explain how a firm decides its debt/equity ratio based on each of the hypothesis/theory mentioned.
a) AJI Limited current share price is $20 and it has just paid a $1 dividend. As AJI is a mature firm, this $1 dividend is expected to grow at a rate of 4% per year. What is an estimate of the return shareholders of AJI Ltd expected to earn?
b) AJI also has preference shares outstanding that pays $2 per share fixed dividend. If this stock is currently priced at $24, what is the return that preference shareholders expect to earn?
c) AJI has issued a 5 year bond with a coupon rate of 11% and par value of $1,000. The price received by AJI was $1,200. What is AJI’s pre-tax cost of debt?
d) AJI has 5m ordinary shares outstanding and 1 m preference shares outstanding. Its equity has a total book value of $50m and its liabilities have a book value of $20m. If AJI’s ordinary and preference shares are priced as in parts a) and b), what is the market value of the AJI’s assets?
e) AJI faces a 30% tax rate. Given the information in parts a) – d), and your answer to those problems, what is AJI’s WACC?
Your grandfather is planning to invest $25,000 into the following stocks:
Rio Tinto Ltd
Cathay Pacific Airlines
a) Collect the year-end (adjusted closing) stock prices for Rio Tinto Ltd and Cathay Pacific Airlines from the period 2010-2015. For each stock, show the annual stock returns. (Hint: students may collect stock prices from Yahoo Finance).
b) Based on the annual stock returns, calculate the average stock returns and standard deviation for each stock.
c) Calculate the covariance and correlation of annual stock returns between these stocks. Explain your answers.
d) Find the 30 days BAB (bank Accepted Bill) rate (risk-free rate) as at June 2015. (Hint: students may collect the risk-free rate from the Reserve Bank of Australia). Calculate the Sharpe ratio for Rio Tinto Ltd and Cathay Pacific Airlines. Which stock is performing better? Explain your answer.
e) Suppose grandfather invests 60% in Rio Tinto and 40% in Cathay Pacific Airlines, calculate the expected return and standard deviation for this portfolio. Is this portfolio perform better than the individual stock?
Product Code :Fin72
To get answer for this question, kindly click here (Note: Don’t forget to write the product code in comment section)
You can also email us at email@example.com but please mentioned product code in the mail body while sending emails.You can browse more questions to get answer in our Q&A sections here.