Briefly discuss the differences between Modigliani and Miller’s theory of capital structure and the trade-off theory in terms of assumptions and results.

Q: Suppose management is unwilling to permit losses exceeding 18% of a financial institution’s capital…

A: Formula to be used: Concentration limit=Capital * Maximum allowable loss rateAmount lost per dollar…

Q: In the context of the Pastor-Stambaugh multifactor model (PSM), the relevant risk factors are the…

A: Risk factors in both the Pastor-Stambaugh and Fama-French models include: Market Risk (MKT): This…

Q: An employee is 10 years from retirement and has decided to begin making $2,000 annual contributions…

A: IRA stand for Individual Retirement Account is a type of savings account designed to help people to…

Q: C a s e  1 . J a n e   M c D o n a l d ,   a   f i n a n c i a l   a n a l y s t   f o r   C a r r o…

A: The cash budget is prepared by businesses to know the cash receipts, payments, and closing cash…

Q: Given the following information estimate the yield to maturity of this corporate bond. Assume that…

A: A bond’s yield to maturity can be considered as its internal rate of return. At the YTM rate the…

Q: Which of the following statement is least likely to be correct? - The WACC is used to find the…

A: WACC is the weighted average cost of capital. It represents the average cost of capital after tax of…

Q: XYZ bank currently has 600 million in transaction deposits on its balance sheet. The current…

A: The required reserve is the portion of transaction deposits that banks are required to hold in…

Q: 5) Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while the return on the…

A: The required return of an asset is the rate of return required by an investor considering the risks…

Q: 24. Following are a company's income statement at the end of the last year (year 0) and coming year…

A: Free cash flows are cash flows that are available for investors after firm has met all operating…

Q: Barry bought a new television set for $425. He paid nothing down but agreed to payments of $37.28…

A: Finance charge will be the difference between the total payments in loan and the loan…

Q: White Knuckle Inc is considering to invest in either of the following projects. Project 1 Cash Flow…

A: Pv of cash flows = (1000*0.862 + 2000*0.7431+12000*0.6406) = 10,035 Intial investment= $10000   NPV…

Q: (a) Compute the present value of an annuity immediate that pays £50 per year for 10 years at an…

A: Present value refers to the current worth of the expected sum of the amount. It is computed by…

Q: ABC Co. has average shareholders' equity of 1,000,000, which includes $200,000 par value of 12%…

A: Average shareholders' equity P1,000,000 Less: Preferred shares P200,000 Ordinary stockhodler's…

Q: Personal Financial Statement PERSONAL BALANCE SHEET Assets EX. Checking Account A EX. Savings…

A: Introduction: Checking Account-Account held at a financial institutions  with no cap on deposit or…

Q: 2. Critically evaluate the organizational and management issues (such as power, hierarchy and…

A: Organizations are social entities that rely on structures, systems, and processes to achieve their…

Q: Historical Average Return 25% 20% 15% 10% 5% Corporate Bonds Treasury Bills S&P 500 World Portfolio…

A: The total risk of a security comprises of unique risk (unsystematic risk) and market risk(systematic…

Q: Both answers are wrong.

A: Growth rate = 17% Debt-equity ratio = 1.1 Profit margin = 4.4% Total asset turnover = 1.04

Q: BDJ Co. wants to issue new 21-year bonds for some much-needed expansion projects. The company…

A: Bonds are debt instruments issued by companies. Bonds pay coupons and this is usually paid on a…

Q: For each of the following, compute the present value: (Do not round inte calculations and round your…

A: The PV of an investment refers to its cumulative value after discounting the cash flows to the…

Q: IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's…

A: IRR is the internal rate of return which will be generated by the performance of the project. At…

Q: Celeste Nossiter borrowed $5600 from her father to buy a used car. She repaid him after 10 months,…

A: Future value is the estimated value of current assets that is discounted at an assumed rate of…

Q: Consider a bond with a coupon rate of 10% and coupons paid annually. The par value is $1000 and the…

A: The question is based on the concept of Stock valuation. The present value of anticipated future…

Q: en the following information estimate the price of this corporate bond. Assume that the bond just…

A: Price of bond is the present value of coupon payments plus present value of par value of bond based…

Q: Sharp Co. has generated these data for the 2 most recent years where 2021 sales price was 10% lower…

A: Sales Value in year 2020 = P 1,900,800 Sales Value in year 2021 = P 1,944,000 Let Sales Price in…

Q: You own a stock portfolio invested 22 percent in Stock Q, 23 percent in Stock R, 42 percent in Stock…

A: Portfolio Beta is the total of each stock weightage in the portfolio multiplied by the beta of each…

Q: formation on four investment proposals is given below: Investment required Present value of cash…

A: Capital budgeting helps companies allocate their resources effectively and efficiently. By…

Q: Mr Winston entered into an agreement that gave him the right to purchase stationery for R12 000.…

A: The fact that Mr. Winston did not exercise the option during the current assessment year does not…

Q: Suppose the interest rate is 9.3% APR with monthly compounding What is the present value of an…

A: Here, Particulars Values Interest rate 9.30% Number of years 5.00 Number of compounding…

Q: You invest funds in a stock market index fund whose share price is currently K100, and your time…

A: HPR = Expected Price + dividendsCurrent Price - 1 The dividend yield consider the total return in…

Q: Give typing answer with explanation and conclusion Project S requires an initial outlay at t = 0 of…

A: NPV analysis helps identify projects that are expected to generate the highest net benefit. By…

Q: Which is not a potential problem of utilizing ratio analysis? A. trends and industry averages are…

A: A ratio is the relationship between one value and another. The ratio should be between different…

Q: d calculation fomula different both times

A: If a firm has EBIT in perpetuity, then the value of the firm is calculated as shown below. Value of…

Q: News Corporation (US stock) has a beta of 1.37 and a required rate of return of 10.21%. If you are…

A: Here, Beta is 1.37 Required Rate of Return is 10.21% Risk Free Rate is 3.0%

Q: of the Garnett Corp. has a 22 percent ROE and a 15 percent payout ratio, what is its sustainable…

A: Return on Equity (ROE)=22% Payout ratio=15% Required: Sustainable growth rate=?

Q: Question three Mzee have Tshs 800,000,000 in the bank account, of which he wants to invest in…

A: Meaning of Physical Assets: Physical Assets are tangible assets. The return of physical assets can…

Q: the interest tax shield and the probability of distress for different level V of interest tax shield…

A: To find the optimal level of debt for the company, we need to determine the level of debt that…

Q: Jami's Home Repair borrows $6,000, at 13.75% interest, for 330 days. Use the exact interest method…

A: Principal Amount = p = $6000 Interest rate = r = 13.75% Time = t = 330 days

Q: The most recent financial statements for Live Co. are shown here: Income Statement Sales Costs…

A: The highest rate of growth that a business may maintain without using more equity or debt to finance…

Q: 4. Evan and Chase are driving from Miami, Florida to New York City, a distance of 1,292 miles. How…

A: Time and distance problems entails assessment of total distance traveled at average speed in…

Q: Question (3) Mary made five annual deposits of $X1 in a savings account that pays interest at a rate…

A: The future value (FV) refers to the value of an investment or asset at a specified point in the…

Q: Selected data from ABC Co. for 2021 appear below: Sales $100,000 Operating expenses $18,000 60,000…

A: Profit margin %  = (Net income ÷ sales ) × 100. Where , Net income is profit after taxes .

Q: A company received a loan of $30,000 from a bank that was charging interest at a rate of 4.80%…

A: A loan is an agreement between a lender and a borrower in which the lender provides a sum of money…

Q: A balloon payment is a loan where you pay small amounts of the loan first and then, at the end of…

A: Balloon payment refers to the single payment that should be paid at the end of the loan period in…

Q: 2) Using the following cost and revenue information shown for Walmart, determine how the costs,…

A: The exchange rate are very important when companies doing business in other countries and return…

Q: A loan is offered with monthly payments and a 9.00 percent APR. What's the loan's effective annual…

A: compound = n = monthly = 12 Annual Percentage Rate = APR = 9%

Q: On January 1, Year 1, Bacco Company had a balance of $69,600 in its Delivery Equipment account.…

A: The cash flow statement refers to the statement showing the money's movement in and out of the…

Q: Lisa plans to invest $300 each month for the next 17 years in a 529 account for Zach starting next…

A: Monthly deposit = $300 Period of monthly deposits = 17 years Additional amount at the end of Year 10…

Q: Green Tea House has a tax rate of 25 percent and an interest tax shield valued at $8,046 for the…

A: Tax Rate = 25% Interest = $8046

Q: Find the future value. (Use the Table 12.1.) (Do not round intermediate calculations. Round the "FV…

A: Future value refers to the method of capital budgeting which is used for the value of a current…

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.