Finance Answers

. If you like to buy a new equipment for $13000 and you receive a cash inflow of $ 2500 per year for 10 years. What is the internal rate of return?

N(t)=2400000e^0.03t

What time is required for the population to tripple if N is the population size at time while t is the number of years

Company uses a 10% interest rate for all capital expenditures and has done the following analysis for four projects for the upcoming year:

Project A

Initial capital outlay $200,000

Annual net cash inflows Year1 65,000 - Year2 70,000 - Year3 80,000 - Year4 40,000

Project B

Initial capital outlay $298,000

Annual net cash inflows Year1 100,000 - Year2 135,000 - Year3 90,000 - Year4 65,000

Project C

Initial capital outlay $248,000

  Annual net cash inflows Year1 80,000 - Year2 95,000 - Year3 90,000 - Year4 80,000

Project D

Initial capital outlay $272,000

  Annual net cash inflows Year1 95,000 - Year2 125,000 - Year3 90,000 - Year4 60,000

a)     You are required to select one of the above projects using Accounting Rate of Return; Payback Period; Net Present Value. 

b)     Which project(s) company should undertake using NPV if it has 500,000 funds available?     

Given the Earnings before interest and taxes(EBIT) is Rs 30000 Interest payment is Rs 10000 Dividend on the preference shares Rs9000 Taxes being 50% of the profit before taxes(PBT). Number of outstanding equity shares 10000

What would be the earning per share(EPS) and degree of financial leverage (DFL), What would be the change in EPS, and DFL, if the EBIT increases to Rs50000 and Rs80000 Note- you have to calculate three EPS and three calculations for DFL

 Suppose a three-year corporate bond provides a coupon of 6.0% per year payable semiannually and has a yield of 5.0% (expressed with semiannual compounding). The yields for all maturities on risk-free bonds is 3.5% per annum (also semiannual compounding). Assume that defaults can take place every six months (immediately before a coupon payment) and that the recovery rate is 38%. Estimate the semiannual default probabilities assuming that the unconditional default probabilities are the same on each possible default date. 

Suppose that

i. The yield on a five-year risk-free bond is 3.0%

ii. The yield on a five-year corporate bond issued by company X is 6.2%

iii. A five-year credit default swap providing insurance against company X defaulting costs 280 basis points per year.

(a) What arbitrage opportunity is there in this situation?

(b) What arbitrage opportunity would there be if the credit default spread were 340 basis points instead of 280 basis points?

(c) Give two reasons why arbitrage opportunities such as those you have identified may be less than perfect in a real-world situation.

 Suppose that the risk-free zero curve is flat at 4.0% per annum with continuous compounding and that defaults can occur at times 0.25 years, 0.75 years, 1.25 years, and 1.75 years in a two-year plain vanilla credit default swap with semiannual payments. Suppose further that the recovery rate is constant at 30% and the unconditional probabilities of default (as seen at time zero) are 1.75% at time 0.25 years, 2.00% at time 0.75 years, 2.25% at time 1.25 years, and 2.60% at time 1.75 years. (a) Model this CDS and calculate the required credit default swap spread. (b) What would the calculated credit default spread be if the instrument was a binary credit default swap instead?

How are FinTech start-ups and Big Tech firms competing and

cooperating with incumbents from big finance? How has Big Finance

reacted?

The organization structure of a Bank’s Treasury unit involves designing of its operations across Front office, Mid-office, and Back office. Describe each of these three operating arms in terms of its nature, purpose / objectives, and the skills / qualifications of the people employed in these 3 operating arms

Do-Re-Mi Ltd is a retailer of musical instruments and has the following historical collection pattern for its credit sales:

 70 per cent collected in the month of sale.

 15 per cent collected in the first month after sale.

10 per cent collected in the second month after sale.

4 per cent collected in the third month after sale.

 1 per cent uncollectable.

The credit sales have been budgeted for the last seven months of the year, as shown below:

June

$55 000

July

60 000

August

70 000

September

80 000

October

90 000

November

100 000

December

85 000

Required

1.    Calculate the estimated total cash receipts during October from credit sales

2.    Calculate the estimated total cash receipts during the December quarter from credit sales during the quarter.