In recent years there has been considerable growth in the use of credit derivatives‚ which protect lenders against the risk that a borrower will default. For example‚ bank A may be reluctant to refuse a loan to a major customer (customer X) but may be concerned about the total size of its exposure to that customer. Speculators in search of large profits (and prepared to tolerate large losses) are attracted by the leverage that derivatives provide. By this we mean that it is not necessary to lay out
Free Insurance Risk Hedge
S Equip is creating a cash budget for the following year and has forecasted expected cash collections over the next five quarters (one year plus first quarter of next year) Q1 Q2 Q3 Q4 Q5 Sales 1650 1950 2000 1800 2050 Cash collections 1650 1700 1750 1750 At end of Q1 right now. Purchases are 74% of expected sales next qt Taxes are 15% of next period’s sales in Q3‚ Mooney expects to expand one plant which requires additional 1‚074 million investment Every quarter‚ Mooney
Premium The Target Tax Target Corporation
P0 P1/D1 Pt/Dt Rate of Return of Stock r = (D1 + P1)/P0 - 1 Given annual growth rate g1‚ g2‚ then g3 remained constant forever: Di = Di-1*(1+r) P2 = D3 /(R-g) P0 = D1 /(1+r)+ (D2+P2)/(1+r)2 Variation: quarterly basis Di = Di-1*(1+r)4 P2 = D3 /(R-g/4) Variation2: Change of Growth Find the R before Change: P0 = D1 /(R+g) Use it to find future P P1 = D2 /(R+gnew) Bond Repayment = total bond*(face value + last payment price) Efficient Market -Stock prices fully reflect available information
Free Financial markets Time value of money Interest
Mini-Case 3 There are various advantages and disadvantages mutual funds offer compared to company stock for you retirement investing. Advantages: First‚ there is a lower cost; mutual funds are usually lower in expenses than company stock. Second‚ diversification‚ where diversification is used to reduce the portfolio risk. When you invest in multiple stocks from different companies there are more benefits from lower risk. Third they are convenient. Mutual funds are relatively easy to buy. Minimum
Premium Investment Mutual fund
Case Solutions Fundamentals of Corporate Finance Ross‚ Westerfield‚ and Jordan 9th edition CHAPTER 1 THE McGEE CAKE COMPANY 1. The advantages to a LLC are: 1) Reduction of personal liability. A sole proprietor has unlimited liability‚ which can include the potential loss of all personal assets. 2) Taxes. Forming an LLC may mean that more expenses can be considered business expenses and be deducted from the company’s income. 3) Improved credibility. The business may have
Premium Financial ratios Financial ratio Balance sheet
Bio 1610 Vocabulary Words CH 1-4 CH 1 Emergent Properties- The greater good‚ bike parts in a box = useless‚ put them together = useful. Systems Biology- Using data to predict the function or result of an affect or variable has on a biological system. Biosphere- The earths atmosphere‚ the earths crust‚ the life in the ocean etc. Ecosystem- A community of organisms and their physical environment‚ ie- the dessert‚ a coral reef‚ a jungle etc. Community- All of the groups of animals or
Free Atom
the corporation several advantages over other types of firms. One of them is the unlimited liability.Answer | | | | | Selected Answer: | False | Correct Answer: | False | | | | | * Question 4 1 out of 1 points | | | Two important financing decisions for a corporate financial manager are debt policy decision and dividend policy decision. Debt policy asks what level of debt is best for the firm. The dividend policy asks what dividend payout ratio is best for the firm.Answer
Premium Net present value Cash flow Internal rate of return
MINICASE REPORT PRAIRIE STORES What is the Rate of Return Percentage? In the mini-case‚ Mr. Breezeway indicated two kinds of percentage to determine the required return. One of them is the companies’ return on book equity (% 15) and the other one is the investment return percentage in the rural supermarket industry (% 11) which shows that investors in rural supermarket chains‚ with risks similar to Prairie Home Stores‚ expected to earn about % 11 percent on average. Since the companies’ rate
Premium Stock Stock market Investment
based on an analysis of the fair values of the interests in the legal entity. 4. The activities of the legal entity are primarily related to securitizations or other forms of asset-backed financings or single-lessee leasing arrangements. 2.) Even though the investment risk is greater than 10% of the total assets for LeaseMed‚ you still have to demonstrate that the equity is sufficient to permit the legal entity to finance its own activities according to ASC 810-10-25-45a‚b‚c. LeaseMed does not
Premium Pharmacology Pharmacy Pharmaceutical drug
in the context of business valuations (business valuations are covered in chapters 9-12). Slow Fashions - 20 marks‚ June 09 Your business - 28 marks‚ June 09 Seal island - 24 marks‚ June 2010 Q1i‚ii‚iii Seal island - 4 marks‚ June 2010 Q1iv Tisa Co- 4 marks‚ June 2012 Q4c Tisa Co- 8 marks‚ June 2012 Q4b Neptune- 6 marks‚ June 2008 Q5b 5: DCF TECHNIQUES AND THE USE OF FREE CASH FLOWS Maximisation of shareholder wealth Investment decision DCF techniques & the use
Premium Net present value