FIN 401-061 RYERSON UNIVERSITY Midterm Exam – March 4‚ 2013 – Prof. M. Toffanin Version A Time allowed: 2 hours Aids allowed: Closed book except for an 8 1/2” by 11” crib sheet. Answer all multiple choice questions on the scan sheet. All questions are worth 1 mark each. There are 30 multiple choice questions. Good luck! 1. Which version of the exam do you have? This is a free mark – take it. Make sure you answer it correctly‚ though. A) Version A B) Version B Please use the following
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Theorem Summary and Conclusions Selected References PART TWO: THE INVESTMENT DECISION 2. 2.1 2.2 2.3 2.4 2.5 Capital Budgeting Under Conditions of Certainty The Role of Capital Budgeting Liquidity‚ Profitability and Present Value The Internal Rate of Return (IRR) The Inadequacies of IRR and the Case for NPV Summary and Conclusions 8 8 8 10 11 13 15 18 21 24 25 27 27 28 28 34 36 37 what‘s missing in this equation? Please click the advert You could be one of our future talents maeRsK inteRnationaL
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4 1. You’ve observed the following returns on INTC Corporation’s stock over the past five years: -25%‚ -36%‚ 9%‚ 11%‚ and 17%. a. What was the arithmetic average return on the stock over this five-year period? b. What was the variance of returns over this period? c. What was the standard deviation of returns over this period? d. Suppose the current T-bill rate is 0.15%. What is the risk premium of owing INTC Corporation’s stock? e. What range of returns would you expect to see 95% of the time
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Raising the Interest Rate Principles of Finance Introduction After years of declining interest rates‚ we are facing a dilemma; should the Federal government increase rates to contain inflation‚ or keep rates low to boost the US economy? Increases in consumption of oil‚ metals‚ materials‚ and food‚ both foreign and domestic‚ are increasing demand. Prices are rising on a global scale as demand increases. Additionally‚ the US is experiencing rising costs for healthcare and education. Yet‚ the
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this helped in creating a bright outlook for this section of Mensa’s business. Therefore‚ it will be better for the firm to expand this business. I recommend increasing the size of the operation. In order to be able to increase the sales and returns within this sector‚ there needs to be capital investment. I agree with the outlook‚ the firm should invest $250‚000‚000 initially and could increase it to $300‚000‚000 in the following 5-7 years‚ with a decrease to $100‚000‚000 a year at that time
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exercise are about choosing an appropriate benchmark‚ either for evaluating past investment returns or assessing a new project. Ideally‚ a benchmark should reflect the opportunity cost‚ or the best alternative investment. If an investment manager’s past returns significantly exceed an appropriate benchmark‚ then we can conclude that he or she had legitimate stock picking skill. Similarly‚ if the expected return on a new investment project exceeds an appropriate benchmark‚ then we can conclude that it
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that the Return on Investment was as follows: |1993 |1994 |1995 |1996 |1997 |1998 |1999 |2000 |2001 |2002 |2003 | |Return on Investment % |-0.4 |5.2 |11.9 |11.5 |14.7 |12 |11.1 |6.4 |-6.5 |-9.6 |-0.3 | | In reviewing the company’s Return on Investment‚ we can see an increased in the Airline Return on Investment in 1993 the return on investment was a negative 0.4 in 1994 the return on investment became positive at 5.2 ;and in 1995 the return on investment was 11.9‚ for 1996 the return on investment
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stated in the executive summary‚ the GlobaLove financial goal is to achieve a 81% rate of return on the initial investment. In this situation‚ each shareholder will receive $24.43 dividend per share. In order to achieve the financial goal of 81% return on investment‚ GlobaLove must make a net profit of $733.00 by selling $1‚800.00 worth of products. (Scenario 2) There are several factors which will affect the return on investment; fixed costs‚ variable costs‚ product pricing‚ and cost per unit. In this
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an additional resource allocation. The marginal cost and marginal return have an inverse relationship and can almost be represented as mirror images of each other. The peak of the marginal product corresponds with the lowest point of the marginal cost. Thus as marginal product increases‚ the marginal cost decreases and vice versa. The relationship can be attributed to the law of diminishing returns. As we start adding labor‚ the output per additional labor increases
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commitment to safer private property rights‚ successful privatization has a significant effect on emerging stock market development through the resolution of policy risk‚ i.e. the risk of ex post policy changes with redistributive impact on investment returns. The evidence showed the progress in privatization gradually leads to increased confidence. (c) Promoting healthy financial institutions Healthy financial institutions especially banks‚ is a crucial prerequisite for financial stability. The largest
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