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Question;Wk 1 -;Conference Questions;Ratio;analysis is a very powerful tool for analyzing financial performance that has;many valuable applications and some inherent potential weaknesses. Answer the;following two questions in one paragraph each: (1) identify the major;application of Ratio Analysis and (2) identify some of the potential weaknesses;that are inherent in ratio analysis overall.;Wk 2-;Conference Questions;The core;formula underlying the time value of money theory, FV= PV x (1+r)nand;its reciprocal;PV =;FV/(1+r)n, is based on the assumption that a dollar today is worth;more than a dollar tomorrow because it is assumed you can invest the dollar;today and earn additional value.;While;this is generally true;Can you identify some conditions;where the assumption might not hold?When the conditions do not;hold, what is the wise course of action for today?s dollar holder?When the invested dollar;does not earn additional value, are the basic time value formulas still;valid? Explain your answer.;Wk 3-;Conference Questions;The ?Nominal? rate of interest is composed of several components;each of which has an impact on the actual interest charged or received: (1);Identify these interest rate components, (2) define what they represent, (3);what determines their magnitude, and (4) specify how they impact on the nominal;rate. Use illustrative examples or formulas if and as necessary.;Wk 4-;Conference Questions;Traditional financial theory states that there is;an inverse relationship between a bond?s price and the current interest rates;i.e. when interest rates go up, bond prices fall and when interest rates go;down, bond prices rise.;(1) For the following two scenarios is that;statement true? - provide your supporting rationale.;Scenario 1: You purchase a $1,000 par value bond 5 year;maturity bond with a coupon rate of 5% and a Yield to maturity of 6%, You;plan to sell this bond in 3 years.;Scenario2: You purchase a $1,000 par value bond;5 year maturity bond with a coupon rate of 5% and a yield to maturity of 6%.;You plan to keep the bond to maturity (5 years).;(2) Also identify some factors other than the;interest rate that can affect the price of a bond?;(3) Who bears the risk, gain or loss, of a;change in bond price?;Wk 5-;Conference Questions;The;Capital Asset Pricing Model (CAPM), is a powerful analytical tool for use;calculating the price of common stock. After reflecting on theory and;application of the CAPM model, post a one paragraph response to each of the;following questions;1.;What are the primary advantages of the Capital;Asset Pricing Model (CAPM) in pricing common stock?;2. What are some;potential issues in effectively using the (CAPM) to determine the price of a;stock?;You must post a message before you can read and;reply to posts;Wk 6-;Conference Questions;Answer;in one paragraph each, with supporting rational the following three questions;1.;In your own words contrast the strength and;weaknesses of each capital budget decision model against the NPV model;2.;Given the Net Present Value (NPV) method of capital;budget analysis is superior to the Internal Rate of Return (IRR) method;explain why so many companies still use the IRR;method;3. Identify the;capital budget decision model that most appeals to you and why it has its;appeal;You must post a message before you can read and;reply to posts;Wk 7-;Conference Questions;Beta Incorporated has a current WACC of 12.6 % as;shown below;Component;Capital In $;Capital in %;Cost of Capital %;Wtd. Cost of Capital;Debt;$50 Million;50%;8%;4.0;Preferred Stock;$10 Million;10%;14%;1.4;Common Stock;$40 Million;40%;18%;7.2;Total Capital;$100 Million;100%;-;12.6%;Beta is considering a major capital project which;will cost $30 million and they have accepted an loan contract with Hope Bank;for a $30 Million, 10 Year loan at 10% interest to finance this specific;project. Beta Incorporated uses the NPV model to evaluate capital budgets;and there is some disagreement in the company as to the proper discount rate to;use for this project. Some say: the loan rate (10%), since the loan is;specifically to finance the project, others say the WACC (12.6%), and others;say neither is correct. Given this confusion, they have come to you as their;financial consultant for the correct answer.;1.;In one paragraph present your decision and your;supporting argument;2.;If you answer is Neither 10% or 12%, explain in;words how you would calculate the correct answer.;Wk 8-;Conference Questions;Having now studied capital budgeting;decisions, working capital management, and cash flows, provide a short;explanation of how the firm?s capital budget plans for next year could impact;on the firms projected working capital and cash flow for that year. Give an;illustrative example with numbers of how these factors interact using two;components of working capital.

Paper#50400 | Written in 18-Jul-2015

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