a.
To show: The data in tabular form in new worksheet.
Introduction: An investor may purchase stock of a company and become the stockholder (owner) of the company. Based on the performance of the company and demand for company’s stocks, the value of company’s stocks increases or decreases.
a.
Explanation of Solution
The date have been shown in ‘column A’ while price of stock has been represented in ‘column’ B. The tabular presentation of the given data has been shown below:
b.
To compute:
Introduction: An investor may purchase stock of a company and become the stockholder (owner) of the company. Based on the performance of the company and demand for company’s stocks, the value of company’s stocks increases or decreases.
b.
Explanation of Solution
Rate of return for each year has been computed using the following formula:
Thus, the calculated rate of return has been shown below:
c.
To compute: Cumulative total return since 2011.
Introduction: An investor may purchase stock of a company and become the stockholder (owner) of the company. Based on the performance of the company and demand for company’s stocks, the value of company’s stocks increases or decreases.
c.
Explanation of Solution
Cumulative rate of return can be computed by adding each year’s rate of return. It can be computed on excel using following formula:
Thus, the calculated cumulative rate of return has been shown below:
d.
To compute: Rate of return for holding period and compound average rate of return.
Introduction: An investor may purchase stock of a company and become the stockholder (owner) of the company. Based on the performance of the company and demand for company’s stocks, the value of company’s stocks increases or decreases.
d.
Explanation of Solution
The rate of return for the holding period can be computed as:
The calculated answer has been shown below:
Now, compound annual average of return can be computed using:
e.
To prepare: Line chart and scattered chart. Also, state the difference between the two charts and suggest the most suitable.
Introduction: An investor may purchase stock of a company and become the stockholder (owner) of the company. Based on the performance of the company and demand for company’s stocks, the value of company’s stocks increases or decreases.
e.
Explanation of Solution
The line chart has been prepared for FAST stock prices:
The scattered chart has been prepared for FAST stock prices:
Following are the differences between line and scatter chart:
Line chart: The values ??are plotted only on the y-axis i.e., the vertical axis. While, on the x-axis i.e., the horizontal axis the sequence number of the value is shown. Exceptions: graphs with the date on the X-axis.
Scatter chart: The relationship between two values is represented using the scatter chart. Scatter charts is often known as XY chart.
Here, two different values are not given which means there is no need to find the relationship between two values. So, in order to find trend of stock prices a line chart is more appropriate.
f.
To prepare: 3-D line chart and discuss if it helps in better understanding.
Introduction: An investor may purchase stock of a company and become the stockholder (owner) of the company. Based on the performance of the company and demand for company’s stocks, the value of company’s stocks increases or decreases.
f.
Explanation of Solution
The line chart has been prepared for FAST stock prices:
The 3-D line chart has been prepared:
The comparison between the two charts can be seen easily. Thus, yes the enhancements will make data more attractive for the reader.
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Chapter 1 Solutions
EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI
- Eccles Inc., a zero-growth firm, has an expected EBIT of $100.000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. What is the firm's cost of equity according to MM with corporate taxes? Ο 32.0% Ο 25.9% Ο 21.0% Ο 28.8% Ο 23.3%arrow_forwardP&L Corporation wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells for $42 per share, and each bond would have 75 warrants attached to it each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds with-warrants at par? a. 9.54% b. 8.65% c. 9.08% d. 8.24% e. 83%arrow_forwardPotter & Lopez Inc. just sold a bond with 50 warrants attached. The bonds have a 20-year maturity and an annual coupon of 12%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 15%. What is the implied value of each warrant? Ο $4.35 O $3.76 O $4.56 O $4.14 O $3.94arrow_forward
- If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that The dividend payout ratio is decreasing. The dividend payout ratio has remained constant. The dollar amount of investments has decreased. No dividends were paid during the year. the dividend payout ratio is increasing.arrow_forwardq6) Which of the following statements is CORRECT? If Congress increases taxes on capital gains but leaves tax rates on dividends unchanged, this will motivate companies to increase stock repurchases. The clientele effect explains why firms change their dividend policies so often.. One advantage of the residual dividend policy is that it helps corporations to develop a specific and well-identified dividend clientele. If a firm splits its stock 2-for-1, then its stock price will be doubled. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.arrow_forwardAmold Rossiter is a 40-year-old employee of the Barrington Company who will retire at age 60 and expects to live to age 75. The firm has promised a retirement income of $20.000 at the end of each year following retirement until death. The firm's pension fund is expected to earn 7 percent annually on its assets and the firm uses 7% to discount pension benefits. What is Barrington's annual pension contribution to the nearest dollar for Mr. Rossiter? (Assume certainty and end-of-year cash flows. a. $3,642 b.$4,443 c. $4,967 d.$5,491 e.$2,756arrow_forward
- Morales Publishing's tax rate is 40%, its beta is 1.10, and it uses no debt. However, the CFO is considering moving to a capital structure with 30% debt and 70% equity. If the risk free rate is 5.0% and the market risk premium is 6.0%, by how much would the capital structure shift change the firm's cost of equity? Ο 1.53% Ο 2.05% Ο 1.70% Ο 1.87% O 2.26%arrow_forwardThe common stock of Southern Airlines currently sells for $33, and its 8% convertible debentures (issued at par, or $1,000) sell for $850. Each debenture can be converted into 25 shares of common stock at any time before 2025. What is the conversion value of the bond? a. $825.00 b.$866.25 c. $744.56 d. $783.75 e. $707.33arrow_forwardBailey and Sons has a levered beta of 1.10, its capital structure consists of 40% debt and 60% equity, and its tax rate is 40%. What would Bailey's beta be if it used no debt, i.e., what is its unlevered beta? a. 0.79 b. 0.71 c. 0.67 d. 0.64 e. 0.75arrow_forward
- Eccles Inc., a zero-growth firm, has an expected EBIT of $100.000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. What is the value of the firm according to MM with corporate taxes? a. $710,875 b. $587,500 c. $646,250 d. $475,875 e. $528,750arrow_forwardMikkleson Mining stock is selling for $40 per share and has an expected dividend in the coming year of $2.00 and has an expected constant growth rate of 5%. The company is considering issuing a 10-year convertible bond that would be priced at $1,000 par value. The bonds would have an 8% annual coupon, and each bond could be converted into 20 shares of common stock. The required rate of return on an otherwise similar nonconvertible bond is 10.00%. What is the estimated floor price of the convertible at the end of Year 3? a. $926.10 b. $794.01 c. $835.81 d. $879.80 $972.41arrow_forwardMs. Lloyd, who is 25 and expects to retire at age 60, has just been hired by the Chambers Corporation. Ms. Lloyd's current salary is $30,000 per year, but her wages are expected to increase by 5 percent annually over the next 35 years. The firm has a defined benefit pension plan in which workers receive 2 percent of their final year's wages for each year of employment. Assume a world of certainty. Further, assume that all payments occur at year-end. What is Ms. Lloyd's expected annual retirement benefit, rounded to the nearest thousands of dollars? a. $116,000 b. $35,000 c. $89,000 d. $57,000 e. $132,000arrow_forward
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning