A retail furniture company buys furniture wholesale and distributes it through its retail stores. The owner believes that she has some good ideas for making stylish new furniture. She is considering a project to buy a factory and employ workers to manufacture the new furniture she's designed. Furniture manufacturing has more systematic risk than furniture retailing.
Her furniture retailing firm's after-tax WACC is 20%. Furniture manufacturing firms have an after-tax WACC of 30%. Both firms are optimally geared. Assume a classical tax system.
Which method(s) will give the correct valuation of the new furniture-making project? Select the most correct answer.
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 a fully amortising 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?
A 2 year corporate bond yields 3% pa with a coupon rate of 5% pa, paid semi-annually.
Find the effective monthly rate, effective six month rate, and effective annual rate.
##r_\text{eff monthly}##, ##r_\text{eff 6 month}##, ##r_\text{eff annual}##.
Total cash flows can be broken into income and capital cash flows. What is the name given to the income cash flow from owning shares?
A stock's required total return will increase when its:
An investor owns a portfolio with:
- 80% invested in stock A; and
- 20% invested in stock B.
Today there was a:
- 10% rise in stock A's price; and
- No change in stock B's price.
No dividends were paid on either stock. What was the total historical portfolio return on this day? All returns above and answer options below are given as effective daily rates.
A firm conducts a two-for-one stock split. Which of the following consequences would NOT be expected?
Question 811 log-normal distribution, mean and median returns, return distribution, arithmetic and geometric averages
Which of the following statements about probability distributions is NOT correct?
Question 925 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate, no explanation
The arithmetic average and standard deviation of returns on the ASX200 accumulation index over the 24 years from 31 Dec 1992 to 31 Dec 2016 were calculated as follows:
###\bar{r}_\text{yearly} = \dfrac{ \displaystyle\sum\limits_{t=1992}^{24}{\left( \ln \left( \dfrac{P_{t+1}}{P_t} \right) \right)} }{T} = \text{AALGDR} =0.0949=9.49\% \text{ pa}###
###\sigma_\text{yearly} = \dfrac{ \displaystyle\sum\limits_{t=1992}^{24}{\left( \left( \ln \left( \dfrac{P_{t+1}}{P_t} \right) - \bar{r}_\text{yearly} \right)^2 \right)} }{T} = \text{SDLGDR} = 0.1692=16.92\text{ pp pa}###
Assume that the log gross discrete returns are normally distributed and that the above estimates are true population statistics, not sample statistics, so there is no standard error in the sample mean or standard deviation estimates. Also assume that the standardised normal Z-statistic corresponding to a one-tail probability of 2.5% is exactly -1.96.
Which of the following statements is NOT correct? If you invested $1m today in the ASX200, then over the next 4 years: