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UMUC MGMT640 Midterm part 2




Question;1. What is the future value of $1,400, placed in a saving;account for four years if the account pays 0.09, compounded quarterly?;2. Your;brother, who is 6 years old, just received a trust fund that will be worth;$22,000 when he is 21 years old. If the fund earns 0.11 interest compounded;annually, what is the value of the fund today?;3. If;you were to borrow $9,100 over five years at.12 compounded monthly, what would;be your monthly payment?;4.;Your uncle promises to give you $500 per quarter for the next five;years. How much is his promise worth right now if the interest rate is 0.08;compounded quarterly?;5. A;stock has an expected return of 0.11 and a variance of 0.22. What is its;coefficient of variation?;6. Use;the following information to calculate your company's expected return.;State;Probability;Return;Boom;20%;.35;Normal;60%;.14;Recession;20%;-0.20;7.You;have invested in stocks J and M. From the following informatino, determine the;beta for your portfolio.;Expected;Amount of;Return;Investment;Beta;Stock J;0.09;$100,000;1.29;Stock M;0.11;$300,000;.79;8.;Frazier Manufacturing paid a dividend last year of $2, which is expected to;grow at a constant rate of 5%. Frazier has a beta of 1.3. If the market is;returning 11% and the risk-free rate is 4%, calculate the value of Frazier's;stock.;a);$25.93;b);$31.33;c);$38.53;d);$41.63;9. You;have invested 30 percent of your portfolio in Jacob, Inc., 40 percent in Bella;Co., and 30 percent in Edward Resources. What is the expected return of your;portfolio if Jacob, Bella and Edward have expected returns of 0.10, 0.13 and;0.04, respectfully?;10. The;covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0700.;The variance of Willow is 0.2460, and the variance of Sky Diamond is 0.1050.;What is the correlation coefficient between the returns of the two stocks?;11.;A project has the following cash flows;0;1 2;3;($500);$140 $200;$270;What is;the project's NPV if the interest rate is $6%?;12.;Assume the following facts about a firm's financing in the next year.;Calculate;the weighted cost of the capital of this project;Proportion;of Capital Projected funded by debt = 45%;Proportion;of Capital Projects Funded by equity - 55%;Return;Recevied by Bondholders = 0.10;Return;Received by Stockholders - 0.14;13.;A project requires an initial outlay of $100,000, and is expected to;generate annual net cash inflows of $28,000 for the next 5 years. Dteremine the;payback period of the project;a).28;years;b) 1.4;years;c) 3.57;years;d);17.86 years;14. An;investment project requires an initial outlay of $100,000 and is expected to;generate annual cash inflows of $28,000 for the next 5 years. (round to the;nearest tenth of the percentage) Determine the (Internal Rate of Return) IRR;for the project using a financial calculator.;a);12.0%;b) 3.6%;c);12.6%;d);12.4%;15.;Capital budgeting analysis of mutually exclusive projects A and B yields the;following;Project A;Project B;IRR;18%;22%;NPV;$270,000;$255,000;Payback;Period 2.5 years;2.0 years;Management;should choose;a);Project b because most executives prefer the IRR method;b);Project b because two out of three methods choose it;c);Project a because NPV is the best method;d);either project because the results aren't consistent;16.;Christopher Electronics bought new machinery for the $5, 015,000 million.;This is expected to result in additional cash flows of $1,210,000 million over;the next 7 years. What is the payback period for this project? Their acceptance;period is five years.;17.;AMP, Inc., has invested $2,165,800 on equipment. The Firm uses payback;period criteria of not accepting any project that takes more than four years to;recover costs. The company anticipates cash flows of $427,386, $512,178;$563,755, $764,997, &816,500, and $825,375 over the next six years. What is;the payback period?


Paper#49263 | Written in 18-Jul-2015

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