EBK ESSENTIALS OF INVESTMENTS
10th Edition
ISBN: 8220102800267
Author: Bodie
Publisher: YUZU
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Chapter 17, Problem 3PS
Summary Introduction
(A)
Adequate Information:
Current price/spot price - $1200
Risk-free interest rate - 2%
Time period to maturity - 1 year
To Compute:
Price of Futures Contract
Introduction:
The price of the futures contract can be calculated usingSpot-Futures parity theorywhich states that if an asset purchased today and held until the maturity of the futures contract, the value of the future contract is equal to the current spot price adjusted for the variables such as interest rate, dividends, time to maturity etc. In simple mathematical equation:
Future price=Spot price X (1 + Risk free interest rate - dividend yield)^ time period in years
Summary Introduction
(B)
To design
Risk free return strategy to take advantage of future pricing of gold futures contract and compute profits on the strategy.
Introduction:
Risk free return strategy are option strategies where one can sell option on one side and buy option on the other side to get good return.
Given information:
Here spot price of gold futures contract is $1200 and the selling price is $1141. Also, the price of gold futures contract at maturity of 1 year will be $1224.
Explanation:
The spot price is $1200 and selling price is $1141 which means we can sale the gold at $1200 and at the same time buy the gold futures contract at $1141. After one year since the price of this gold futures contract will be $1224 so there will be profit on futures contract bought at$1141 which is ($1224-$1141) $83.
Therefore, the profit on risk free strategy of gold futures contract is $83.
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QUESTION #1:
A) What is the Net Operating Profit After Tax (NOPAT) for 2024?B) What is the Operating Cash Flow for 2024?
C) What is the Free Cash Flow for 2024?
Note: Marketable securities are non-operating current assets, and short-term debt (bank loan) is a non-operating current liability. Both of these items are excluded from the calculation of net operating working capital.
D) If the stock trades for $85 per share at the end of 2024, and there are 315,000 shares outstanding, what is the MVA in 2024?
E) Given that the firm’s WACC is 14%, what is the EVA during 2024?
F) Create common size income statement and balance sheet for 2024, 2023 and 2022.
G) Using 2022 as the base year, create income statement and balance sheet percentage change analysis for 2024 and 2023.
QUESTION #2:
In addition to the AAA Ltd. financial statements in Problem One, you are given more information as follows.
Sales are forecast to increase by 80% in 2025.
Short-term Debt, Long-term Debt, and Common…
Chapter 17 Solutions
EBK ESSENTIALS OF INVESTMENTS
Ch. 17.4 - Experiment with different values for both income...Ch. 17.4 - 2. What happens to the time spread if the income...Ch. 17.4 - Prob. 3EQCh. 17 - Prob. 1PSCh. 17 - Prob. 2PSCh. 17 - Prob. 3PSCh. 17 - Prob. 4PSCh. 17 - Prob. 5PSCh. 17 - Prob. 6PSCh. 17 - Prob. 7PS
Ch. 17 - Prob. 8PSCh. 17 - Prob. 9PSCh. 17 - Consider a stock that will pay a dividend of D...Ch. 17 - Prob. 11PSCh. 17 - Prob. 13PSCh. 17 - Prob. 14PSCh. 17 - Prob. 15PSCh. 17 - Prob. 16PSCh. 17 - Prob. 17PSCh. 17 - Prob. 18PSCh. 17 - Prob. 19PSCh. 17 - Prob. 20PSCh. 17 - Prob. 21PSCh. 17 - Prob. 22PSCh. 17 - Prob. 23PSCh. 17 - Prob. 24CCh. 17 - a. How would your hedging strategy in the previous...Ch. 17 - Prob. 26CCh. 17 - Prob. 27CCh. 17 - Prob. 1CPCh. 17 - Prob. 2CPCh. 17 - Prob. 3CPCh. 17 - In each of the following cases, discuss how you,...Ch. 17 - Prob. 5CPCh. 17 - Joan Tam, CFA, believes she has identified an...Ch. 17 - Prob. 7CPCh. 17 - Prob. 8CPCh. 17 - Prob. 9CPCh. 17 - Prob. 1WMCh. 17 - Prob. 2WMCh. 17 - Prob. 3WMCh. 17 - Prob. 4WM
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