Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. Toronto Dominion Bank 0.60 0.16 0.05 0.38 1.00 BHP Billiton Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP Standard deviation (%) BHP Billiton Siemens 1.00 0.39 1.00 BHP Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP 28.60 Portfolio Variance 25.40 Nestlé -0.05 0.29 1.00 9.24 LVMH 0.42 0.14 0.04 1.00 20.20 11.70 Samsung 0.52 0.36 -0.03 0.56 0.20 1.00 30.50 a. Calculate the portfolio variance for seven different portfolios. (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places.) BP 0.49 -0.07 0.05 0.06 0.35 0.36 1.00 19.80

Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. Toronto Dominion Bank 0.60 0.16 0.05 0.38 1.00 BHP Billiton Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP Standard deviation (%) BHP Billiton Siemens 1.00 0.39 1.00 BHP Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP 28.60 Portfolio Variance 25.40 Nestlé -0.05 0.29 1.00 9.24 LVMH 0.42 0.14 0.04 1.00 20.20 11.70 Samsung 0.52 0.36 -0.03 0.56 0.20 1.00 30.50 a. Calculate the portfolio variance for seven different portfolios. (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places.) BP 0.49 -0.07 0.05 0.06 0.35 0.36 1.00 19.80

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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еВook Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $3 million, $6 million, $10 million, and $14 million. After the fourth year, free cash flow is projected to grow at a constant 4%. Brandtly's WACC is 11%, the market value of its debt and preferred stock totals $52 million, the firm has $15 million in nonoperating assets, and it has 8 million shares of common stock outstanding. a. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. b. What is…
2. An analyst for Acme, R. Runner, has recommended that Peter the Anteater purchase shares in a private firm (a firm that is not traded on any exchange) called Dynamite Corp. Dynamite has 30% debt and 70% equity. R. Runner believes that Dynamite will generate a return of 10% over the next year. Since Y. Lee is new to the job, he decides to do a little research on his own. He finds a company, Explosions Unlimited, that has very similar business as Dynamite. Explosions has an equity beta of 1.05 and is composed of 40% debt and 60% equity. Should Peter the Anteater buy the stock? The expected return on the market is 12% and the expected risk-free rate is 5%.
When you bought 300 shares of Tesla at $100/ share and 3 years later it is trading at $150/share and you are still holding onto it, hoping it may still increase in value; So you have not sold it yet in anticipation of the stock price rising even higher, what is your tax liability in year 3 O The difference between where you bought it and where it is currently trading O The $50 gain times the 300 shares you are holding O It depends on what happened in year 2 O None
Suppose a stock pays shareholders $100/year in dividends. The stock is to be held for 10 years. How much will an investor be willing to pay for the stock at 10% interest, if the investor is certain that the company will go bankrupt after 10 years (i.e., the stock will be worthless and no further dividends will be paid)? O A. $1,000 O B. $514 O C. $1,594 O D. $16 OE. $614
) Your firm has the following structure: you own all the shares of the Dixit paper cup company. Dixit has $2,000,000 of outstanding perpetual debt with a 10% coupon selling at par. Dixit is currently selling paper cups which produce earnings before interest of $210,000 per year. You receive the following offer from your engineer friend. He would help you liquidate Dixit’s assets and with the proceeds you could build solar powered scooters. Your financing would remain the same. You believe that there is a 75% chance that solar powered scooters would not be particularly successful. In this case they would generate only $100/year. However, there is a 25% chance that solar powered scooters would be very successful. In this case they would generate $500,000 per year. Assume your equity discount rate is 15%. Assume the firm pays no taxes. b) What is the value of the solar powered scooters investment assuming a 15% discount rate? c) What is the value of your equity under each of these…
Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Billiton BP Siemens Nestlé Sony Sanofi Agricultural Bank Standard deviation, % Agricultural BHP Billiton BP 1.00 Siemens Nestlé Sony Sanofi Bank 0.44 0.21 -0.05 0.21 0.15 0.24 1.00 0.40 0.24 0.27 0.36 0.27 1.00 0.26 0.33 0.29 0.21 1.00 0.34 0.27 -0.06 1.00 0.27 0.35 1.00 0.17 1.00 26.2 22.8 22.5 13.6 27.6 17.5 25.5 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the portfolio variance for seven different portfolios.…
Adrian Tutoring (AT), a private company, has 500,000 shares outstanding with no debt AT's current EBIT of $500,000 is not expected to grow in the near future. If AT's stock price is $8 and tax-rate is 30% then estimate AT's weighted-average cost of capital (WACC). AT is considering to sell $1M of bonds and simultaneously buyback shares. Assuming debt-rate of 7%, determine the following after restructuring: Enterprise Value, Share Price and WACC . Based on above , discuss how leverage can be advantageous and disadvantageous to common shareholders. List three Advantages and three Disadvantages if AT were to become a Public Company . Now suppose that AT has $400,000 of preferred shares outstanding that have a yield of 8% on par and are callable at a 5% premium. If new issues will incur 2 0/0 flotation costs , then at what interest rate would AT refinance?
please answer the question as in attached file asap. thanks

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