Two models, R, = 9.21+0.62t and R, =9.21+0.45t , are given for revenue (in billions of dollars per year) for a large corporation. Both models are estimates of revenues for 2007 through 2011, with t= 7 corresponding to 2007. Which model is projecting the greater revenue? How much more total revenue does that model project over the five- year period? A) The model R, projects greater revenue than R,. $9.65 billion B) The model R, projects greater revenue than R,. SES $8.65 billion C) The model R, projects greater revenue than R,. $7.65 billion D) The modelR projects greater revenue than R,. $11.65 billion E) The model R, projects greater revenue than R,. e solhou poze $17.65 billion
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- Matollows and 250 shillings in the following year. After that, dividends are expected to grow at constant 5% per year. If the required rate of return is 10%, what price should investors pay for such shares today? 4. Suppose a firm is considering a project that would require an initial cash outlay of 15 million shillings and expected to generate shs 4.5 million each year for the next 4 years. The firm assumes that the prices and costs increases at the same rate and that the required rate of return expressed in nominal terms is 14%. The firm also practices a policy whereby cash flows are stated at the prices of period zero. The inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the acceptability of investment projects could be considered. (b)Using the NPV technique, is the project worth taking? What have you learned from your analysis as far as treating inflation in investment analysis is concerned? 30/2021 4:39:41 PM Page 1 of 2The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain.e) There is a business cycle expansion, so both supply and demand shifts. After the shift, thenew demand curve is given by: D = 4000 + X − 2P, whereas the new supply curve is S =2P + 200. For which values of X will the interest increase/decrease? Which values of X arein line with empirical data?Please help me!! Qx=1.0-2.0Px+1.5I+0.8Py-3.0Pm+1.0A Where Qx= sales of CFC cornflakes, in millions of 10-ounce boxex per year Px= the price of CFC cornflakes, in dollars per 10-ounce box I= personal disposable income, in trillions of dollars per year Py= price of competitive brand of cornflakes, in dollars per 10-ounce box Pm= price of milk, in dollars per quart A= adveritising expenditures of CFC cornflakes,in hundreds of thousands of dollars per year This year, Px=$2, I=$4, Py=$2.50 , Pm=$1, A=$2 Questions c) Estimate the level of sales next year if CFC reduces Px by 10 percent and increases advertising by 20 percent, Income rises by 5 percent, Py is reduced by 10 percent, and Pm remains unchanged. (d) By how much should CFC change its adveritsing if it wants its sales to be 30 percent higher than this year?
- The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate?6. An all-equity firm is considering the following projects. The T-bill rate (risk-free rate) is 3.5 percent, and the expected return on the market is 11 percent. IRR 9.4% 10.9% 13.0% 14.2% |Project Beta W 80 Y Z. .95 1.15 1.45 • Which projects have a higher expected return than the firm's 11 percent overall cost of capital? • Which projects should be accepted according to the risk (beta) of the project? • Which projects would be incorrectly accepted or rejected if the firm's overall cost of capital was used as a hurdle rate?2. A man is considering investing P500, 000 to open a semi-automatic auto-washingbusiness in a city of 400, 000 population. The equipment can wash, on the average, 12 carsper hour, using two men to operate it and to do small amount of hand work. The man plansto hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 daysper week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects tocharge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 permonth.He would pay his employees for 2 weeks for vacations each year. Because of the length ofhis lease, he must write off his investment within 5 years. His capital now is earning 15%,and he is employed at a steady job that pays P25, 000 per month. He desires a rate ofreturn of at least 20% on his investment. Would you recommend the investment?a) Use ROR method b) Use present worth method c) Use future worth method d) Solve for the payback period and the IRR
- := Suppose AE = 20 - 500r +0.5Y, potential output is 40 and current r = 0.02, then Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b 16 Homework Answered Due Mar 17th, 11:59 PM с d Output is at its potential There is a negative output gap of 20 There is a negative output gap of 10 The mpc will fall Your answer1. D i f f e r e n t i a t e b e t w e e n h o r i z o n t a l a n d v e r t i c a l a n a l y s i s ? W h a t i s t r e n d a n a l y s i s ? 2. S u p p o s e y o u a r e c o m p a r i n g t w o f i r m s w i t h i n a n i n d u s t r y . O n e i s l a r g e a n d t h e o t h e r i s s m a l l . W i l l r e l a t i v e o r a b s o l u t e n u m b e r s b e o f m o r e v a l u e i n e a c h c a s e ? 3. W h a t k i n d s o f s t a t i s t i c s c a n h e l p e v a l u a t e r e l a t i v e s i z e ? 4. B r o w n C o m p a n y e a r n e d 5 . 5 % o n s a l e s i n 2 0 0 7 . W h a t f u r t h e r i n f o r m a t i o n w o u l d b e n e e d e d t o e v a l u a t e t h i s r e s u l t ? N o t e : A n s w e r s h o u l d b e q u i t e l o n g f o r m e t o u n d e r s t a n d m o r e a n d a l s o e x p l a i n e d i t i n a s…How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 1) The corporate tax rate is lowered. 2) The Federal Reserve tightens credit. 3) The firm uses more debt; that is, it increases its debt ratio 4) The dividend payout ratio is increased.
- 9. Assume that a medical device has a useful life of 10 years, and it loses its real value at a constant rate (i.e. 1/10 of the original value per year). At a 6% interest rate, and including depreciation in the calculation, over a 7 year period a $80,000 investment must earn at least approximately ____________ to be economically viable. 10. Assume that a machine has a useful life of 9 years, and it loses its real value at a constant rate (i.e. 1/9 of the original value per year). At a 5% interest rate, and including depreciation in the calculation, over a 6 year period a $100,000 investment must earn at least approximately ____________ to be economically viable.Figure 2 shows the payments and revenues of a small project. If M.R.R.R= %12, Evaluate the project economically using A.W method $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $2,500 $500 0 $20,000 2 $1,000 ترا $1,500 $2,000 $2,500 $3,000 $3,90gure 22. A man is considering investing P500, 000 to open a semi-automatic auto-washing business in a city of 400, 000 population. The equipment can wash, on the average, 12 cars per hour, using two men to operate it and to do small amount of hand work. The man plans to hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 days per week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects to charge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 per month. He would pay his employees for 2 weeks for vacations each year. Because of the length of his lease, he must write off his investment within 5 years. His capital now is earning 15%, and he is employed at a steady job that pays P25, 000 per month. He desires a rate of return of at least 20% on his investment. Would you recommend the investment? a) Use ROR method ( b) Use present worth method: c) Use future worth method d) Solve for the payback period and the IRR,