Finance Answers

Is there scope for inter-governmental competition in the Tiebout model? Explain.

Why is the Benefits Received Approach not applicable for direct taxes?

Hi. I'm trying to figure out how many employees a company needs to add base on the sales volume increased? 40 hours work week.

Sales Revenue=$1,020,000
Current Employees=74
Total hours for the month=13,757
Overtime dollar percentage=26%
Overtime dollar=$63,000

Would you be able to assist me in finding out how many more workers needed based on the above info? I don't know what formula to use?

I was thinking $1,020,000/74=$13,783 per ee / 26% = $53,014 / 160 = $331 / 8 = 41 employee?

Thanks,
Wen

You are working with the manager of an irrigation facility who is interested in installing a
more efficient pumping system. The proposed system costs $15,000 and you project that it will
reduce the annual utility costs by $2,000. After five years, you expect to upgrade the system for
$4,000. This upgrade is expected to further reduce utility costs by $1,000 annually. The annual
effective interest rate is 7% and the life of the system, after upgrade is 50 years. What is the
Present Value of the investment in the system?

You are considering an investment in a 40-year security. The security will pay RM25 a year
at the end of each of the first three years. The security will then pay RM30 a year at the end
of each of the next 20 years. The nominal interest rate is assumed to be 8 percent, and the
current price (present value) of the security is RM360.39. Given this information, what is
the equal annual payment to be received from Year 24 through Year 40 (i.e., for 17 years)?

1- You have just been promoted as the new assistant branch manager of a local-based
international bank. The branch manager, who is an expatriate, has asked you a question on
the different types of interest rate quotations. The question he asked is which rate should
the bank advertise on monthly-compounded loans - the nominal annual percentage rate or
the effective annual percentage rate? And which rate should the bank advertise on
quarterly-compounded savings accounts? Please explain to the branch manager which
quotation would attract consumers and why?

a) Hugh has opened a retirement fund account which pays 7 percent interest and requires
$5,000 annual deposits. Hugh will retire in 15 years and expects 10 years of retirement life.
What is the maximum annual retirement benefit Hugh can get during his retirement years?

b) To expand its operation, Sunbeam Ltd. has applied to the Lion Bank for a 3-year, $3,500,000
loan. Prepare a loan amortization table assuming 10 percent rate of interest.

In 2015, it was revealed that Volkswagen (VW) had installed software on its diesel cars in order to circumvent US emissions tests. Carefully, outline what this scandal involved, and explain why the actions of the VW management were unethical. Discuss what issues may have caused this behavior to occur, and what you would do to prevent this from happening in the future. Evaluate the impact of this scandal on the value of VW, and explain why the value of the firm may change by more than the cost of the recall to correct the issue.

1- A number of publicly traded firms pay no dividends yet investors are willing to buy
shares in these firms. How is this possible? Does this violate our basic principle of stock
valuation? Explain your answer.


2- The risk free rate of return is 8 percent; the expected rate of return on the market is 12
percent. Stock X has a beta coefficient of 1.3, an earnings and dividend growth rate of 7
percent, and a current dividend of RM2.40. If the stock is selling for RM35, what should
you do?

Barracuda Inc., has a beta of 1.40, the annual risk free rate of interest is currently 10
percent, and the required return on the market portfolio is 16 percent. The firm
estimates that its future dividends will continue to increase at an annual compound rate
consistent with that experienced over the 2009–2012 period.
Year Dividend(RM)
2009 2.70
2010 2.95
2011 3.25
2012 3.40
(a) Estimate the value of Barracuda Inc., stock.

(b) A lawsuit has been filed against the company by a competitor, and the potential loss
has increased risk, which is reflected in the company’s beta, increasing it to 1.6. What
is the estimated price of the stock following the filing of the lawsuit.