What is captial budgeting? Why a separate capital budget is needed?

Q: The following information relates to Pug Company Sales revenue Contribution margin S600.000 $150,000...

A: Ratio of percentage change in income and percentage change in sales is the degree of operating lever...

Q: sume tilat gets sick, her medical bills will amount to $3600. She has a wealth of $10,000. Suppose s...

A: In economics, utility generally refers to the pleasure or satisfaction that consumers get from using...

Q: George deposits $500 at the end of each quarter for 6 years, in an account paying 12 % compounded qu...

A: Annuity means a set of finite number of payments made in equal intervals of time for a certain  peri...

Q: A firm's current ratio has steadily increased over the past 5 years, from 1.9 to 3.8. What would a f...

A: Current ratio measures the liquidity  which is calculated by dividing current assets by its current ...

Q: The nominal annual interest rate on 6-month USD Treasury Bill is 4.50%. The spot rate of the Euro is...

A: Given: Spot rate = $3.8643 Forward rate=$3.8880 US interest rate=4.50%

Q: An investor is considering an investment that will pay $2,290 at the end of each year for the next 1...

A: The payment required to be made can be calculated with the help of PV function.

Q: Find the present value of the investment. (Round your answer to the nearest cent.) funding $8,000 wi...

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

Q: Far value is $2,000,000 Assume a three-year bond with an 8% annual coupon. If rates change from 8% t...

A: Par value = $2000,000 Coupon rate = 8% Annual coupon amount = 2000,000*0.08 = $160,000 Years to matu...

Q: Western Lumber Company expects to have free cash flow in the coming year of $4.25m and is expected t...

A: Here, Expected Free cashflow=$4,250,000 Growth rate = 4% Cost of equity = 10% Pre-tax Cost of debt =...

Q: Consider these two alternatives:

A: IRR (Internal Rate of Return) is defined as the minimum rate that is needed to be earned in order to...

Q: . A one-month European put option on a non-dividend stock is currently selling for 2.50$. The stock ...

A: An European put option can only be exercised on its maturity. It is a kind of derivative option that...

Q: Tettletale News Corp has been growing at a rate of 10% per year, and you expect this growth rate in ...

A: Here, Current Dividend is $5 Growth Rate for 3 years is 10% Growth Rate after 3 years is 2% Discount...

Q: National Inc. has 100 bonds outstanding with maturity value each of P1,000. The nominal required rat...

A: Par value of bond (FV) = P1000 Coupon rate = C Semi annual coupon amount (P) = 1000*C/2 = 500C Years...

Q: Suppose that P 4500 is deposited each year into a bank account that pays 8% interest compounded quar...

A: When an amount is deposited in any account, it pays interest. A series of equal annual payments is c...

Q: Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put up P10,0...

A: Given: Short of shares = 10,000 Price =P4 Initial margin = 60% Amount invested = P10,000

Q: A company has issued $75 million (face value) of bonds with three-years to maturity. They offer an a...

A: Semiannual coupon rate Semiannual coupon rate is calculated as shown below.         Semi-annual coup...

Q: The following data are gathered for: · The real risk-free rate is 1.25% · Inflation premium is const...

A: Real risk free rate = 1.25% Inflation premium = 2.50% Default risk premium = 5% Liquidity premium = ...

Q: Your company is evaluating a switch from a cash policy to a net 30 policy. The price per unit is $49...

A: Here, Selling Price per unit (P) = $49 Variable cost per unit (V) = $20 Sales units (S) = 100 units ...

Q: Bl Inc currently has earnings before interest and taxes of P3,000,000, a degree of combined leverage...

A: The degree of operating leverage can be used to estimate change in operating income with respect to ...

Q: Suppose you make quarterly deposits into an account that earns 6% annual interest compounded monthly...

A: Interest rate (r) = 6% Number of compounding per year (m) = 12

Q: Thomas is planning to withdraw $6000 from a savings account at the end of each quarter for five year...

A: The present value of future amount of annuities to be withdrawn will give the amount that must be in...

Q: ractice 1 Your friend is celebrating her 35th birthday today and wants to start saving for her anti...

A: There is need of proper planning for retirement and if you plan at proper time and proper way than t...

Q: Trading in derivatives

A: Derivatives are the type of contracts that force the value of an underlying asset. These contracts h...

Q: 1. Interest paid on interest invested is called  _____ interest.?

A: Annuity:  An annuity is the series of payments which is received or paid for a certain period of tim...

Q: Explain the term receivable float and the ways to avoid receivable float loss. Provide a hypothetica...

A: Receivable float means Float is the time gap in the receivables management   a) Period of credit off...

Q: You think you will be able to deposit $4,000 at the end of each of the next three years in a bank ac...

A: Annuity  An annuity is the series of payments which is received or paid for a certain period of time...

Q: A portfolio has an expected rate of return of 0.16 and a standard devi isk-free rate is 4 percent. A...

A: The risk of the investor and return from the portfolio depends on the utility derived from the portf...

Q: 9.  A company’s balance sheet shows the following relationships: Current ratio: 3.0 times Acid-tes...

A: Given information :  Total assets = £27 million Current ratio = 3 times Acid test ratio = 2.5 times ...

Q: An accountant for Bulldogs Inc. must calculate the weighted average cost of capital of thecorporatio...

A: Weighted average cost of capital(WACC) is the average or overall cost of capital of the company whic...

Q: 17. Compute the rate (in %) for the loan. Round answers to the nearest tenth of a percent; use ordin...

A: Principal = $54000 Interest rate = r Period = 60  days Interest = $864

Q: n annuity pays $500 per year for 12 years beginning one year from today. What is th alue of the annu...

A: The present value of annuity is the equivalent value that is equal to payment to be done considering...

Q: Demed Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The b...

A: Par Value is $1,000 Time to maturity is 18 years Coupon rate is 9% Current price of bond is $950.35 ...

Q: Bulldogs Inc. wants to establish a bond portfolio consisting only of BDO bonds which has a maturity ...

A: Par value (P) = P 1000 Coupon (C) = 5% of 1000 = P 50 r = YTM = 10% We need to find the total portfo...

Q: Find the present value of an investment that is worth $19,513.75 after earning 3% simple interest fo...

A: Present Value: It represents the present worth of the future value of the amount and is computed by...

Q: Following are the card rates announced by the dealing room at 9.00am in the morning          Ch...

A: The selling rate and the buying rate are the exchange rates at which an institution buys or sells th...

Q: he option is currently a.) In-the-money b.) At-the-money c.) Out-the-money

A: In the money option Strike price or exercise price is lower than current market price . For call opt...

Q: 7. Find the amount of simple interest on a loan of $4,500 at  9 1 2%  interest for 13 years. $427.5...

A: Simple interest can be calculated by using this equation Simple interest =Principal*Rate*Time

Q: A certain equipment has a first cost of P 12,000 and a salvage value of P 500 at the end of x years....

A: Equipment cost = P 12,000 Salvage value = P 500 Annual depreciation = P 1,437.5 Life = x

Q: Can you help me with this please? Katrina purchased a dining room set for $1500 down with the balanc...

A: Monthly payment (P) = $198.12 Interest rate = 12% Monthly interest rate (r) = 12%/12 = 1% Total mont...

Q: The Black-Scholes model is used by Bulldogs Inc. to value call options on the stock of National Inc....

A: Black Scholes Model is one of the mathematical model which is used for calculating value of put and ...

Q: Please explain why at a 5% continuous interest rate, it takes the same amount of time for $2000 to d...

A: Time value of money (TVM) is used to measure the value of money at different point of time in the fu...

Q: analyst is trying to determine the intrinsic value of a certain share. Which of the following is tru...

A: To find out the intrinsic value o the stock there two methods one is dividend discount model and fre...

Q: Avon Co. has paid out P6.0 million in dividend to its shareholders. The company earned P20.0 million...

A: Dividend = P 6,000,000 Earning = P 20,000,000

Q: Firms generally decide to call their bonds when interest rates   rise drop remain the same there is ...

A: When the bond interest rate rises, the firms are at an advantage as they have been able to secure fi...

Q: An investor is evaluating the common share of Bulldogs Inc. which has a beta of 1.8. The expected re...

A: Risk free  rate = 2% Market return = 8% Beta = 1.8

Q: DD Plc is expected to declare earnings per share of £1.60 next year. The company historically has re...

A: Present value of growth opportunities is calculated using the current market price of stock and earn...

Q: nnual deposits of $3200 at the beginning of every six- month period into a fund earning 4.2% compoun...

A: Future value includes the deposits made and the interest accumulated over the period of time. That g...

Q: How much is the expected rate of return for Stock A? Use a whole number in percent form, no space, n...

A: Highly favourable probability (P1) = 0.1 Favourable probability (P2) = 0.3 Normal probability (P3) =...

Q: (a) What is meant by 'mutually exclusive projects'? (b) Wivenhoe Ltd's managers sought your advice r...

A: Since you have posted a multiple part question therefore as per our guidelines we will be solving th...

Q: Consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity Yield to Maturity ...

A: Data given: Years to maturity          Yield to maturity 4                                     7.95%...