FCF £800 £1,000 a. Fill in the table below showing the payments debt and equity holders of each firm will receive given each of the two possible levels of free cash flows. Debt Payments ABC Equity Payments Debt Payments XYZ Equity Payments b. Suppose you hold 10% of the equity of ABC. What is another portfolio you could hold that would provide the same cash flows? c. Suppose you hold 10% of the equity of XYZ. If you can borrow at 10%, what is an alternative strategy that would provide the same cash flows?

FCF £800 £1,000 a. Fill in the table below showing the payments debt and equity holders of each firm will receive given each of the two possible levels of free cash flows. Debt Payments ABC Equity Payments Debt Payments XYZ Equity Payments b. Suppose you hold 10% of the equity of ABC. What is another portfolio you could hold that would provide the same cash flows? c. Suppose you hold 10% of the equity of XYZ. If you can borrow at 10%, what is an alternative strategy that would provide the same cash flows?

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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please help thanks A firm raises capital by selling $\$ 10,000 $ worth of debt with flotation costs equal to $3\% $ of its par value. If the debt matures in 5 years and has an annual coupon interest rate of $6\% $, what is the bond's YTM? The bond's YTM is \%. ( Round to two decimal places.)
1. You follow the equity index HSI using an index fund in Hong Kong. You have signed an interest rate swap to exchange the capital gains (losses) from your portfolio, against a sequence of cash flows based on 3-month Libor plus 25 bp. The cash flows are exchanged every 90 days. All cash payments occur in Hong Kong dollars. The notional principal is 1 million. a. Draw the cash flow diagram for the first year. b. Let It be the value of the index at time t. Suppose you have the following data: I₁ = 23,850 I₁ = 24,000 Lo = 4.5% What is the net amount exchanged at period 1?
None
Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100 a. If the opportunity cost of capital is 8%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 8%. c. Which one would you choose if the cost of capital is 16%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?
Let's value a REIT using Net Asset Value another way. (All values are in Millions) Assume a REIT has debt of 1,000M, there are 100M shares outstanding, both the stock price and NAV/share equal $5, and a fair cap rate for the portfolio is 10.0%, what is the implied NOI? $100M $105.5M $101 M $150M
Provide Correct Option select
15. A company needs to borrow £10 million for 6 months, 2 months from now. The type of FRA and the position it should take in order to hedge the interest rate risk of such transaction are: A. ‘2-6’ FRA Short position B. ‘2-6’ FRA Long position C. ‘2-8’ FRA Short position D. ‘2-8’ FRA Long position
The following table shows the forecast cash flows for two projects: C₁ C3 C₁ C5 Co -$1,080 $28 -1,080 $28 $1,264 74 A B It Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table: 1 4.0% Req A1 2 4.5% IRRA IRRB C₂ $28 74 t Req A2 3 5.0% a-1. Calculate the IRR on the two projects. a-2. Calculate the NPV on the two projects. a-3. Do the two measures give the same ranking for the two projects? $28 1,090 Complete this question by entering your answers in the tabs below. 4 5.5% 5.20 % % 5 6.0% Req A3 Calculate the IRR on the two projects. Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Finance
An all-equity firm is considering the following projects: Project Beta IRR W .58 X .87 Y 1.13 Z 1.47 9.0% 9.7 12.1 15.2 The T-bill rate is 4.2 percent and the expected return on the market is 11.2 percent. a. Compared with the firm's 11.2 percent cost of capital, Project W has a expected return, Project Y has a expected return. expected return, Project X has a expected return, and Project Z has a
Margin %: Your margin account requires an initial margin of 50%, and a maintenance margin of 30%. You deposit $83,000 cash in a brokerage account and purchase stocks using all available margin and borrowing the rest from your broker. Later, the value of your stock holdings rises to $184,000. What is your percent return? O. 100.00% O. 10.84% O. 121.69% O. 21.69%
The investment funds for your company includes the following: Stock $ Amount Invested Beta for Each Stock A $ 600,000 .8 B $ 1,800,000 1.4 C $ 2,400,000 1.7 D $ 700,000 -.6 E $ 3,000,000 1.1 You need to calculate the required rate of return for the investment. The market’s required return for Year 2020 is 12% and the risk free rate is 3% Show your work on the following: Calculate the average beta for the portfolio. Calculate the required rate of return for the entire portfolio. The CFO of your company is anticipating that the stock market will be decreasing in the near future. Please give a recommendation on which stock the company should sell and which stock the company should buy. The CFO also wants you to explain your answer.

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