You want to buy an apartment priced at $500,000. You have saved a deposit of $50,000. The bank has agreed to lend you the $450,000 as an interest only loan with a term of 30 years. The interest rate is 6% pa and is not expected to change. What will be your monthly payments?
An industrial chicken farmer grows chickens for their meat. Chickens:
- Cost $0.50 each to buy as chicks. They are bought on the day they’re born, at t=0.
- Grow at a rate of $0.70 worth of meat per chicken per week for the first 6 weeks (t=0 to t=6).
- Grow at a rate of $0.40 worth of meat per chicken per week for the next 4 weeks (t=6 to t=10) since they’re older and grow more slowly.
- Feed costs are $0.30 per chicken per week for their whole life. Chicken feed is bought and fed to the chickens once per week at the beginning of the week. So the first amount of feed bought for a chicken at t=0 costs $0.30, and so on.
- Can be slaughtered (killed for their meat) and sold at no cost at the end of the week. The price received for the chicken is their total value of meat (note that the chicken grows fast then slow, see above).
The required return of the chicken farm is 0.5% given as an effective weekly rate.
Ignore taxes and the fixed costs of the factory. Ignore the chicken’s welfare and other environmental and ethical concerns.
Find the equivalent weekly cash flow of slaughtering a chicken at 6 weeks and at 10 weeks so the farmer can figure out the best time to slaughter his chickens. The choices below are given in the same order, 6 and 10 weeks.
Find UniBar Corp's Cash Flow From Assets (CFFA), also known as Free Cash Flow to the Firm (FCFF), over the year ending 30th June 2013.
| UniBar Corp | ||
| Income Statement for | ||
| year ending 30th June 2013 | ||
| $m | ||
| Sales | 80 | |
| COGS | 40 | |
| Operating expense | 15 | |
| Depreciation | 10 | |
| Interest expense | 5 | |
| Income before tax | 10 | |
| Tax at 30% | 3 | |
| Net income | 7 | |
| UniBar Corp | ||
| Balance Sheet | ||
| as at 30th June | 2013 | 2012 |
| $m | $m | |
| Assets | ||
| Current assets | 120 | 90 |
| PPE | ||
| Cost | 360 | 320 |
| Accumul. depr. | 40 | 30 |
| Carrying amount | 320 | 290 |
| Total assets | 440 | 380 |
| Liabilities | ||
| Current liabilities | 110 | 60 |
| Non-current liabilities | 190 | 180 |
| Owners' equity | ||
| Retained earnings | 95 | 95 |
| Contributed equity | 45 | 45 |
| Total L and OE | 440 | 380 |
Note: all figures are given in millions of dollars ($m).
Your poor friend asks to borrow some money from you. He would like $1,000 now (t=0) and every year for the next 5 years, so there will be 6 payments of $1,000 from t=0 to t=5 inclusive. In return he will pay you $10,000 in seven years from now (t=7).
What is the net present value (NPV) of lending to your friend?
Assume that your friend will definitely pay you back so the loan is risk-free, and that the yield on risk-free government debt is 10% pa, given as an effective annual rate.
The perpetuity with growth equation is:
###P_0=\dfrac{C_1}{r-g}###
Which of the following is NOT equal to the expected capital return as an effective annual rate?
If a variable, say X, is normally distributed with mean ##\mu## and variance ##\sigma^2## then mathematicians write ##X \sim \mathcal{N}(\mu, \sigma^2)##.
If a variable, say Y, is log-normally distributed and the underlying normal distribution has mean ##\mu## and variance ##\sigma^2## then mathematicians write ## Y \sim \mathbf{ln} \mathcal{N}(\mu, \sigma^2)##.
The below three graphs show probability density functions (PDF) of three different random variables Red, Green and Blue.
Select the most correct statement:
A firm wishes to raise $30 million now. The firm's current market value of equity is $60m and the market price per share is $20. They estimate that they'll be able to issue shares in a rights issue at a subscription price of $15. Ignore the time value of money and assume that all shareholders exercise their rights. Which of the following statements is NOT correct?
Question 873 Sharpe ratio, Treynor ratio, Jensens alpha, SML, CAPM
Which of the following statements is NOT correct? Fairly-priced assets should:
A British man wants to calculate how many British pounds (GBP) he needs to buy a 1 million euro (EUR) apartment in Germany. The exchange rate is 1.42 USD per GBP and 1.23 USD per EUR. What is the EUR 1 million equivalent to in GBP?
Which type of business organisation has the most checks and balances against the detrimental effects of the principal-agent problem since it's potentially the most exposed?