4. Consider an office that there are some valuables which worth $250,000 (books and pipe dreams). This office faces a 0.30 probability of a burglary since the office is in Turkey. If a burglary were to occur, the officers would have to spend $100,000 to replace the stolen items. Suppose it can buy an insurance policy for $20,000 that would fully reimburse it for the amount of the loss. a) Should officers buy this insurance policy? b) Should it buy the insurance policy if it cost $25,000? $35,000? c) What is the most officers would be willing to pay for this insurance policy? How does your answer relate to the concept of risk premium discussed in the text?

4. Consider an office that there are some valuables which worth $250,000 (books and pipe dreams). This office faces a 0.30 probability of a burglary since the office is in Turkey. If a burglary were to occur, the officers would have to spend $100,000 to replace the stolen items. Suppose it can buy an insurance policy for $20,000 that would fully reimburse it for the amount of the loss. a) Should officers buy this insurance policy? b) Should it buy the insurance policy if it cost $25,000? $35,000? c) What is the most officers would be willing to pay for this insurance policy? How does your answer relate to the concept of risk premium discussed in the text?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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5) Your priceless art collection is stolen (the Gregcasso!), you paid $10,000 for it (sorry no insurance) next you sold your Mutual funds for $3,700 and your ACB was $2,250 with no outlays and expenses. Calculate the combined effect of both Dispositions and what is your Capital gain or loss. 6) You purchased 1,000 units of Mutual funds for 10,000 total in 2015. In 2016 you purchased another 500 units at $9.50 a unit, In 2017 another 600 units at $10.50 a unit were purchased and in 2019 400 units at $11 a unit were added. Calculate the average cost base that you would have per unit for the Mutual funds at the end of 2020.
You are going on an overseas trip and you want to have checks that are easily converted into local currency. You should purchase Group of answer choices conditional checks. cashier's checks. guaranteed checks. traveler's checks. certified checks
8 A company offers your friend, Lily, an interesting gamble involving giving her the choice of the contents in one of two sealed, identical-looking boxes. One box has $10,000 in cash and the second has nothing inside. There is an equal probability that the chosen box contains cash versus nothing. Lily states that she would not call off the gamble if you offered her a certain $2,999 instead of her choice of box. However, she would be indifferent if $3,000 was offered in place of the risky gamble; and she would definitely take $3,001 to call off the gamble. We would describe Lily as in this instance. I A. Having a risk preference B. Being risk indifferent C. Being risk averse D. Cannot decide G
18. Suppose the marine salvage company described in the previous problem has located another ship that also contains treasure that could be sold for $12.1 million if it were brought to the surface. The firm is certain that if it invests $6.6 million now, it can recover the treasure in 1 year at no additional cost. The uncertainty now relates to the ownership of the ship. A government agency is currently considering whether the treasure found at this location belongs wholly to the finder or must be shared with a previous owner. In the latter case, the finder would be allowed to recover its direct costs ($6.6 million) but would have to turn over to the previous owner the remaining proceeds from the sale of the treasure. A ruling on this issue is expected in 1 salvąge company's manager believes the probability of a favorable ruling is 0.3. The rate of interest is 10%. What is the expected NPV of waiting until the ownership issue is settled in 1 year before deciding whether to undertake…
As a part of their expansion plan, NYA Company that is producing notebooks is planning to buy a new production line to produce its own ink. Ordinarily, they would resort to their bank to take long-term financing to fund the purchase. However, the company is already highly leveraged, and the bank refused to give them additional funding. What is their best option now if they insist on buying the new production line? Would this type of finance be short or long term? What kind of advantages does the company have if it resorts to this type of financing?
Ma1. Chapter 23 - Testing Cash Balance 42) You are a senior auditor and you are asked to audit the cash balance under U.S. auditing standards. You are asked to test cash. Please (1) describe what you would need from the client to perform testing of cash, (2) once you have what you need from the client, describe the audit procedure you would perform, be specific, and (3) describe anything else you believe would be helpful if any.
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $4,000,000, and it would be depreciated straight-line to zero over 4 years. Because of radiation contamination, it will actually be completely valueless in 4 years. You can lease it for $1,200,000 per year for four years. Assume that your company does not anticipate paying taxes for the next several years. You can borrow at 9 percent before taxes. What is the NAL of this lease?
Knott Inc. has a petty cash fund of $750. (a) Since the petty cash fund is only $750, should Knott Inc. implement controls over petty cash? (b) Whatcontrols, if any, could be used for the petty cash fund?
Q4) a) Dimond 7 has been operating an excavation company in British Columbia for the last 20 years. The company has been successful in generating revenue and free cash flows (FCF). The company is planning to replace 7 excavators. The supplier will trade in old excavators and will deduct $95,000 from the total purchase price of new excavators. Each new excavator will cost $175,000. The corporate tax rate is 35%. The company beta (BA) is 1.15, risk-free return (Rf) is 0.65%, and the expected rate of return on market portfolio is 6%. Based on the risk, the bank will charge 6.35% on the commercial loans/chattel mortgages granted for excavators. The company will use 90% equity financing and 10% debt financing. Based on the above information, please calculate the WACC. Please show all the calculations by which you came up with the final answer. b) Another excavation company called Diamond 12 has 50,000 shares of common stock outstanding with a market price of $50 per share. It has 1,500…
46. Jill's credit card was stolen. The thief charged a $500 kayak before shereported it stolen. How much of the thief's purchase is Jill responsible for?A. $0B. $100C. $500D. $50

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