ected rate of return concept differ from that of the rea

Q: Your factory has been offered a contract to produce a part for a new printer. The contract would…

A: NPV indicates the excess value of project with respect to the fair value of the project. NPV is the…

Q: It is likely that airplane tickets will increase 5% in each of the next 5 years. The cost of a plane…

A: Data given: Cost of a plane ticket at the end of the first year = ₱10720. Increase in airplane…

Q: Discuss risks and returns characteristics of investing in ordinary shares and corporate bonds from…

A: A bond is a financial instrument that represents a loan made by an investor to a borrower (usually a…

Q: Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal.…

A: Evaluating projects is the vital factor in investing in a new project because without evaluating and…

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A: Present value of future amount With future value (FV), discount rate (r) and period (n), the present…

Q: Find the IRR of the project.

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: Hema Corp. is an all-equity firm with a current market value of $1,230 million (i.e., $1.23…

A: Bankruptcy cost is considered to avoid financial devastation, companies can be bankruptcy after…

Q: Travellers Inn (Millions of Dollars) Cash $ 10 Accounts payable $ 10 Accounts 20 Accruals 15…

A: To determine the WACC of the company first the weights of each component of financing is calculated.…

Q: School fees at a certain school are due at the beginning of the year. The fees are set at R12000 for…

A: The amount that have to be invested at the beginning of year 2018 is the sum of present value of…

Q: 1) The cost of debt is 4.2%, the cost of preferred stock is 9.5%, the cost of retained earnings is…

A: Equity financing is the process of raising money from the investors and give ownership to the equity…

Q: What trust, privacy and ethical issues do businesses need to be concerned with when trading online?…

A: The main trust, privacy and ethical concerns of business while doing online trading are as follows:…

Q: moderale curent asset inveatment policy, but it is now considering a change, perhaps to a restricted…

A: Answer-    1. Restricted policy where current assets are 20% of sales.   Sales = $400,000 Current…

Q: When the actual foreign exchange rate for the dollar is greater than the equilibrium rate, the…

A: The above statement is true.

Q: How much will you have saved after 6 years by contributing $1200 at the end of each year if you…

A: Future value refers to the value that an amount would assume at a future time period after…

Q: Corporation Ltd. have 6% coupon bonds traded on the market that have 5 years left to  maturity. The…

A: In calculation of the present value of cash inflows we may use discounting factor. On the basis of…

Q: What is Canada's strategy for regulating big tech? Do you agree? At least three references are…

A: Big Tech, sometimes known as the Tech Giants, Big Four, or Big Five, refers to the top four or five…

Q: Solve manually using formulas. A perpetuity with annual payments is payable beginning 10 years from…

A: The following information has been provided in the question: Time = 10 yearsFirst payment=50…

Q: (b) Calculate the effective interest rate paid by Vri.com and Xadine in the following swap. Vri.com:…

A: Interest Swapping- Under this a person who is taking loan at fixed rate wants to changed it into…

Q: Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909…

A: When we need to compute the PV of any future sum receivable at a specific point in time, we use the…

Q: Explain the process of securitisation as carried out by banks and discuss its role in the 2008…

A: Securitization Securitization is the process of grouping or pooling together numerous financial…

Q: What is the effective rate for an interest rate of 12% compounded continuously?

A: Effective Annual Rate: The effective annual rate of interest is the actual or the real rate of…

Q: Master Machines, Inc. 2017 2018 Sales $1,240 $1,385 COGS 820 910 Interest 25 20 Dividends 25.50…

A: Operating cash flow is cash flow available after the payment of all operating expenses including the…

Q: What is the present value of a perpetuity stream of cash flows that pays P1,000 at the end of year…

A: present value of a perpetuity stream of cash flows = cash flows at end of year 1/(Discount rate -…

Q: Kelly invested in two stocks. She put 22 % into stock A, which has an expected return of 7.3%, and…

A: As per formula we will add weighted returns of each stock to calculate the expected return of her…

Q: compute the rate of return.

A: Accounting rate of return (ARR) refers to a financial ratio which is used by the company to compute…

Q: What is the present value of a 5-year annuity of $4,900 with the first payment to be received 3…

A: As per formula Present value = [P+[P*{1-(1+r)-(n-1)}/r]]/(1+r)t Where P - Annual payment i.e. $4900…

Q: Determine the PW (Present Worth) at 7% of the given cash-flow diagram. Use MS Excel

A: Here, Discount Rate is 7%

Q: What are some of the current challenges facing financial regulators?

A: Financial institutions have undergone many changes in the past decades or so mainly due to…

Q: Question 2 A project that costs $21,500 today will generate cash flows of $7,700 per year for seven…

A: As per formula of payback period   Payback period = Initial project cost/Annual cash inflow Where…

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A: Solution:- Minimum Variance Portfolio is that portfolio in which the weights of securities are such…

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A: Given,  Amount required at the end of year 5 = 115,000 Interest = 3.6% per annum  Time period = 5…

Q: Refer to the table to answer the following questions: Question Answer What was the closing price for…

A: 1) Closing price for McKesson on July 7, 2016 is 191.20   2)High for McKesson per share for the year…

Q: Discuss and critically compare sensitivity analysis and scenario analysis as means of  estimating a…

A: In capital budgeting we look at different projects and determine their financial viability and then…

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A: Financial independence is defined as the status for having an enough wealth or income for paying off…

Q: Formulate the model on a spread and solve using Solver. Give the following: i. Objective function:…

A: NPV stands for net present value. It is one of the often used capital budgeting tool that companies…

Q: Find the compound amount (with interest) on Php50,000 invested for 10 years at 5.25% interest…

A: An amount invested will earn a certain interest each year. There are both simple interest and…

Q: apitalized cost of an asse

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Which one of the following statements is correct if the pecking order theory holds? a. Firms with…

A: According to the pecking order theory, managers prefer to fund investment options using the firm's…

Q: A firm has sales of $1,070, net income of $211, net fixed assets of $514, and current assets of…

A: The common-size balance sheet financial statements are the statements that show the company's…

Q: Joe Levi bought a home in Arlington, Texas, for $141,000. He put down 25% and obtained a mortgage…

A: Loan: It refers to the amount of credit taken by the borrower from the lender. The borrower makes…

Q: A recent college graduate hopes to have 200,000 saved in their retirement account 25 years from now…

A: Here, Future value (FV) = 200,000 Number of years = 25 years Contribution per month = 150 Interest…

Q: Sun Life Investment Fund lends $500,000 for each new idea. The Fund's history is that it selects…

A: Given: Amount Sun Life Investment Fund lend for each new idea= $500,000  The Fund's history is that…

Q: D. Consider E CRA): 20%. E CRe) : 30% a port folio of 2 risky assets A & B where =10% 9:20%% =0:4…

A: Solution:- Minimum Variance Portfolio is that portfolio in which the weights of securities are such…

Q: True or False 1. The first step in the personal financial planning process is determining one's…

A: Financial planning is defined as the step by step approach for meeting the life goals of an…

Q: Sensitivity Analysis Methods

A: Sensitivity analysis is an analysis method that is used to identify how many variations in the input…

Q: The cost price of 35 pairs of sport shoes was $350 per pair. AG Sport Center plan to sell all the…

A: Concept. Gross profit = selling price - cost of goods sold. Hence , Selling price = gross profit +…

Q: Wendell’s Donut Shoppe is investigating the purchase of a new $42,800 donut-making machine. The new…

A: Here, Initial Investment is $42,800 Cost Savings is $5,700 Contribution per dozen is $1.50 No. of…

Q: And investor plans to invest $500 a year and expect to get a 10.5% return if the investor makes…

A: Future value refers to the value that an amount would assume at a future time period after…

Q: True or False 1. Another advantage of having a personal financial plan is effective debt management.…

A: The time period mortgage refers to a sort of credit score automobile wherein a amount of money is…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.