# Finance Problems - Speech or Presentation Example

Summary
Then the bond amounting to \$1,000, which is its value after the holding period of 10 years is discounted back to its present value using the hurdle rate of 9%. The present value amounts…

## Extract of sample "Finance Problems"

Download file to see previous pages A14. (Stock valuation) Suppose Toyota has nonmaturing (perpetual) preferred stock outstanding that pays a \$1.00 quarterly dividend and has a required return of 12% APR (3% per quarter). What is the stock worth?
By looking at the table and the percentage of increases and decreases among the 3 types of bonds, it is apparent that the interest-rate risk is higher for longer versus shorter bonds. The longer ones are more volatile, which signifies the level of risk for the investor. Bond 3 has the highest volatility among the three.
Because the payment to be received would only amount to 150, the future value of the investment only amounts to 150. The number of periods is 3.5 years. Because the coupon rate at 1000 face value is 9.5%, the investor receives 95 in interest payments. Therefore, the expected rate of return amounts to -1.34%.
If the company can pay the principal in the end of the contract, the future value would amount to 1,000. Then the number of years in which interest is paid is 10 years, providing an expected rate of return of 22.42%.
In order to compute for the value of the stock, all the dividend payment should be discounted back to the present, as well as the terminal price. Therefore, the dividend in year 2 is discounted using the hurdle rate of 13% for two years. This amounts to 0.78. Then the terminal price is determined using the dividend growth model, where the dividend in year 3, which has grown by 6% to 1.06, is divided by the difference between the hurdle rate and the growth rate. Thus, the terminal price of the stock is 15.14. But this is the price at year 3. It has to be discounted back to the present using the hurdle rate of 13%. Thus, the present value of the terminal price is 11.86. In order to get the final value, the present value of the dividend should be added to the terminal price which amounts to 12.64. This will be James valuation.
On the other hand, for Bret, the same procedure should be utilized. In order to compute for the ...Download file to see next pagesRead More
Cite this document
• APA
• MLA
• CHICAGO
(“Finance Problems Speech or Presentation Example | Topics and Well Written Essays - 750 words”, n.d.)
(Finance Problems Speech or Presentation Example | Topics and Well Written Essays - 750 Words)
https://studentshare.org/miscellaneous/1557213-finance-problems.
“Finance Problems Speech or Presentation Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/miscellaneous/1557213-finance-problems.
Click to create a comment or rate a document

## CHECK THESE SAMPLES OF Finance Problems

### Corporate Finance Problems

...in change in interest rates =Actual change - Expected cnahge = 11.8- 9.5% = 2.3% So, the total systematic risk on the stock return is b. Suppose unexpected bad news about the firm was announced that dampens the returns by 2.6 percentage points. What' the unsystematic risk of the stock returns Then, the unsystematic risk of the stock return is -2.6%. c. Suppose the expected return of the stock is 9.5%. What is the total return of this stock Total return = Expected return + Unexpected return R = E(R) + U = E(R) + systematic portion + unsystematic portion Bibliography: Corporate Finance, Stephane A.Ross, Randolph W. Westerfield, Jeffrey...
2 Pages(500 words)Essay

### The HR problems at MPC Finance

...Managing People in Context: The HR problems at MPC Finance HR Manager's proposals to higher Management Introduction This report will be aiming on bringing up issues that need take into consideration after observing the HRM of MPC Finance. It will highlight the issues and it will recommend the actions and solutions that need to be made by the MPC to reach its high level of management. MPC Finance being specialized in direct marketing and sales of financial products in the UK and Ireland, thus it could have done still better to manage its HR function in the light of its strategically advantageous position (Schuler, 2008). MPC Finance indeed adopted some far reaching HRM practices compared to its similar organizations such as HSBC... ,...
4 Pages(1000 words)Case Study

### Finance problems

...SOLUTIONS You were hired as a consultant to Keys Company, and you were provided with the following data: Target capital structure: 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 4.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 11.50%. The firm will not be issuing any new stock. What is the firm’s WACC? 7.55% 7.73% 7.94% 8.10% 8.32% Answer) 8.10% Solution: WACC = (Proportion of debt) (After-tax cost of debt) + (Proportion of preferred stock) (Cost of preferred stock)+ (Proportion of common equity) (Cost of common equity) 2. Several years ago the Haverford Company sold a \$1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid... You were...
8 Pages(2000 words)Speech or Presentation

### Statistical techniques for investment, finance or economic problems

...Application of Statistical Techniques for Investment, Finance & Economics Problem Background In 2002, in the aftermath of the technology meltdown, the Federal Reserve drops benchmark interest rates, and the ensuing loss of income for banks and lending institutions prompted the Wall Street bright boys to design new securities for investors such as pension funds, foreign central banks and hedge funds. Called mortgage-backed securities and collateralized debt obligations, such instruments were intended to reduce and disperse risks. With exposure to lower risks, banks and lending institutions felt it was safe to lend more to the high-risk borrowers known as the subprime mortgage market. Five years later,...
30 Pages(7500 words)Essay

### Finance Problems

.... In order to achieve objective of having payout ratios close to the 30-35 range while keeping the payments sustainable, in year 4, I choose to offer dividends as high as that of year 3, with a payout ratio of 39.17%. This is an outlier for the other payout ratios for the rest of the period. IV. (20-A2 Comparing borrowing costs) Stephens Security has two financing alternatives: (1) A publicly placed \$50 million bond issue. Issuance costs are \$1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year life. (2) A \$50 million private placement with a large pension fund. Issuance costs are \$500,000, the bond has a 9.25% annual coupon, and the bond has a 20-year life. Which alternative has the lower...
5 Pages(1250 words)Speech or Presentation

### Corporate Finance Problems

...Finance Questions-Chap 2 & 3 of the of the Finance Questions- Chapter 2 & 3 Chapter 2: Balance Sheet Analysis 8. In March 2005, General Electronic (GE) had a book value of equity of \$113 billion, 10.6 billion shares outstanding, and a market price of \$36 per share. GE also had cash of \$13 billion, and total debt of \$370 billion. Four years later, in early 2009, GE had a book value of equity of \$105 billion, 10.5 billion shares outstanding with a market price of \$10.80 per share, cash of \$48 billion, and total debt of \$524 billion. Over this period, what was the change in GE’s? a. Market capitalization? Market Capitalization June 2005= Market Price per share x Number of Shares Outstanding = \$36 x 10.6...
3 Pages(750 words)Assignment

### Problems around the use of diminishing Musharaka in banking finance and search for patricidal solution

...and insuring the product is passed on to the en buyer through an agreement. The concept of diminishing musharaka can also be used in carrying a business or trade. In the contract the partners accept the fact that an extra payment should be given to the bank from any profit realized for reducing its share in the company. The concept of diminishing musharaka appears practical and has created new financing options for the Islamic banks. The contract optimizes the profitability and the objectives of both the parties into the contract. The transfer of ownership property of the contract creates interest within the entrepreneur and the sharing feature benefits the financer of the contract....
20 Pages(5000 words)Research Paper

### Problems

... of the of the of the Probability Birthday Problem The Birthday Problem is applicable in a scenario where n numbers of people are gathered together in a room. The chances of at least two of the gathered people of having their birthday on the same date needs to be assessed. For this purpose the probability of at least two people having the same birthday needs to be calculated. There may be a number of variations when considering the situations at hand. However, in order to keep the calculations simple enough, the possibilities of their birthdays lying in a leap year and that of the two people having same birthdays being twins etc. have been eliminated. Having done so it may be proposed that in reality there exists a possibility... the...

### Problems

...model to choose between three methods (A,B,C) of financing the acquisition of major competitor. The relative weights for each criterion are shown in the following table as are the scores for each location on each criterion. A score of 1 represents unfavorable, 2 Satisfactory, and 3 favorable Method Category Weight A B C Consulting costs 20 1 2 3 Acquisition time 20 2 3 1 Disruption 10 2 1 3 Cultural differences 10 3 3 2 Skill redundancies 10 2 1 2 Implementation risks 25 1 2 3 Infrastructure 10 2 2 2 Questions 10 Develop a spread sheet for problem 9 a. What would your recommendation be if the weight for the implementation risks went down to 10 and the weight of cultural differences went up to 25? b....
2 Pages(500 words)Assignment

### Problems

...Chapter 4 Problems: ECO 201 Kinghorn QUESTION a) A figure illustrating the imposition of a binding price floor in the cheese market is drawn below. P1 and Q1 show the price and quantity when there is no price floor respectively. When the floor is set at Pf, a price greater than P1, Q2 becomes the quantity demanded. However the quantity supplied is Q3. Thus the surplus of cheese is given by Q3-Q2. b) In cases where demand is elastic then the farmers’ complaint that their total revenue declined if correct. This is because with elastic demand, the % reduction in the quantity would exceed the % rise in the price leading to the fall in total revenue. c) Producers will benefit while taxpayers will lose if the government takes...
3 Pages(750 words)Assignment