Solution Library


Calculating Estimated Return on Investment for New High-tech Machinery

Question A corporation adds to its fixed assets by investing $60 million in new high tech machinery. It expects to increase its annual net profits by $11 million in each of the next 15 years (by then the machinery will be obsolete and will be scrapped at zero cost). What is the estimated annual rat ... Read More

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Calculating Forward Rate Agreements

Question On the 15th of May 2013 you enter a Forward  Rate Agreement (FRA)  to borrow on the 15th of September 2013 $1’000’000 for 8 months at a fixed annualized interest rate of 5% (for a FRA  with a contract length of 8 months the compounding  frequency  is 1. ... Read More

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Calculation of Spot Price of Forwards

Question The current spot price of 1 barrel of crude oil is $120, the 1.75 year spot rate is 5% (c.c.), the (continuous flow of) storage costs of crude oil is 1% per year.(a)  In absence of arbitrage, what should be the forward price to trade crude oil in 1.75 years if crude oil was an investm ... Read More

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Explain how a centralized cash management system could be beneficial to an organization

Question Explain how a centralized cash management system could be beneficial to the MNC and explain why a firm would consider investing in a portfolio of currencies instead of just a single currency? Summary The question belongs to Finance and it is an essay on how a centralized cash management s ... Read More

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Essay on Derivative Instruments for Risk Transfer

Question You have examined various types of derivatives that firms can utilize for the purpose of transferring risk. In this question, you will need to evaluate different scenarios and explain which types of derivatives would be most appropriate.  Given the possible locations, corporate struc ... Read More

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Analysis and Evaluation of Capital Structure of Three Organizations belonging to the Same Industry

Question You are to conduct an analysis and evaluation of the capital structures and costs of capital for three publicly held firms in the same industry over a history of 5 years. The firms are Dell, HP and Apple. You are to follow the guidelines that were used in your project annotation.  You ... Read More

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Difference Between IPO and Issue of Additional Shares in Relation to Cost of Issue

Question Explain in about 2 pages how an IPO differs from an issue of additional shares by a company with existing shares which already has a listing. Suggest why these differences lead to higher costs for IPOs. Explain what implications this has for firms and the decisions that financial managers ... Read More

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Calculation of Return on Stock with Own Money and Partially Borrowed Money

Question You buy a stock for $56 by paying $30 and borrowing the remaining $26 from a brokerage firm at 11 percent annualized interest. The stock pays an annual dividend of $1.20 per share, and after one year, you are able to sell it for $70. Calculate your return on the stock. Then, calculate the ... Read More

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Calculating Return on Investment

Question BBZ stock is priced at $80 per share and pays a dividend of $1.60 per share. An investor purchases the stock on margin, paying $50 per share and borrowing the remainder from the brokerage firm at 8 percent annualized interest. If after one year, the stock is sold at a price of $90 per shar ... Read More

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Stocks Being Affected by Higher Initial Investment

Question How would the return on a stock be affected by a higher initial investment (and lower loan amount)? Explain the relationship between the proportion of funds borrowed and the return. Summary The question belongs to Finance and it deals with how return on stock is affected by higher initia ... Read More

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Calculate Return On Investment

Question Assume that ABC stock is priced at $115 per share and pays a dividend of $2.83 per share. An investor purchases the stock on margin, paying $72 per share and borrowing the remainder from the brokerage firm at 10 percent annualized interest. If after one year, the stock is sold at a price o ... Read More

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Monitoring Previous Investments in Stocks and Bonds

Question As a portfolio manager, you are monitoring previous investments that you made in stocks and bonds of U.S. firms, and in stocks and bonds of Japanese firms. Though you plan to keep all of these investments over the long run, you are willing to hedge against adverse effects on your investmen ... Read More

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