Answer To: FCE756EB-FB72-426C-BBB8-CFA2D23AB82A.JPG 2819768F-0788-483F-A347-742030CE6A9C.JPG...
Yash answered on Sep 02 2021
Solution 4 (L03.2):
Equity = $5 million
Debt/equity Ratio = 1
Hence, Debt = $ 5 Million
Total Assets = Equity + Debt
= $ (5+5) Million = $10 Million
a.) Net Profit = 10% of $10 Million
= $1 Million
b.) ROE = Net profit/Equity*100%
= $1 Million /$5 Million *100%
= 20%
c.) Equity Multiplier = Total Assets/Equity
= $10 Million /$5 Million
= 2
Solution 47 (LO5.5):
a.) First of all, we had to find the P.V. of annuity on 65th Birthday to withdraw $10,000 every year for the following 10 Years
Interest Rate: 7% p. a.
P.V. of an annuity =PMT * ((1 – (1 / (1 + r) ^ -n)) / r)
= 10,000 * ((1-(1/(1+0.07)^-10))/0.07)
= $70,235.82
Now, we had to calculate the annuity payment to be made for 30 years to achieve the P.V. calculated above which were as follows:
Annuity Amount = F.V./(((1+i)^n)-1)/i)
=70,235.82/((((1+0.07)^30)-1)/0.07)
= $ 743.54
Hence, she should annually deposit $743.54 every year to make the desired withdrawal.
b.) Lump – sum amount to be made today = F.V./ ((1+r)^n)
= $70,235.82/((1+0.07)^30)
= $9,226.68
Solution 8 (LO11.2):
Prob (P)
A
B
PA
PB
((A-Mean of A)^2)*P
((B-Mean of B)^2)*P
(A-Mean of A)*(B-Mean of B)*P
0.4
10
4
4
1.6
0.576
9.216
2.304
0.2
-4
0
-0.8
0
46.208
15.488
26.752
0.2
24
16
4.8
3.2
32.768
10.368
18.432
0.2
16
20
3.2
4
4.608
25.088
10.752
Total
11.20
8.80
84.16
60.16
58.24
a.) Expected Return for A = 0.40*10 + 0.20*(-4)+0.20*24+0.20*16
= 11.20%
Expected Return for B = 0.40*4 + 0.20*0+0.20*16+0.20*20
= 8.80%
b.) Mean of A = 11.20 & Mean of B = 8.80
S.D. for A = Square root of 84.16
= 9.17%
S.D. for B = Square root of 60.16
= 7.76%
c.) Expected Return of Portfolio = 0.30*11.20 + 0.70*8.80 = 3.36+6.16 = 9.52%.
d.) Variance of Portfolio = W(A)^2 * Var(A) + W(B)^2 * Var (B) + 2*W(A)*W(B)*COV(A,B)
= 0.60^2 * 84.16 + 0.40^2 * 60.16 + 2*0.60*0.40*58.24
= 30.2976+9.6256+27.9552
= 67.8784
S. D. of portfolio = Square root of 67.8784 = 8.24%
Solution 14 (LO15.3)
a.) Interest Saving = (10% + 12%) - (12.50% + 8%) = 1.50%
b.) Interest rate Swap arrangement:
Homelea Ltd. will borrow at floating rate and enter into swaping arrangement with Scraper Ltd.
Scraper Ltd. will borrow at fixed rate and enter into swaping arrangement with HomeleaLtd.
c.)
Borrower
Rate Type
Swap Interest Payment
Swap Interest Receipt
Interest Cost
Interest Savings
Scraper Ltd.
Fixed
3.25%
-
12.00% - 0.75% = 11.25%
0.75%
Homlea Ltd.
Floating
-
3.25%
10%-0.75% = 9.25%
0.75%
Solution 7 (LO5.5)
Amount at the end of 5th year considering interest in:
Option 1
1
2,50,000.00
1.27
3,17,246.39
2
2,50,000.00
1.20
2,98,904.54
3
2,50,000.00
1.13
2,81,623.15
4
2,50,000.00
1.06
2,65,340.89
5
2,50,000.00
1.00
2,50,000.00
Total
14,13,114.96
Option 2
0
4,00,000.00
1.35
5,38,742.00
1
1,45,000.00
1.27
1,84,002.90
2
1,45,000.00
1.20
1,73,364.63
3
1,45,000.00
1.13
1,63,341.43
4
1,45,000.00
1.06
1,53,897.71
5
1,45,000.00
1.00
1,45,000.00
Total
13,58,348.68
Hence, Option 1 is preferred.
Solution 16 (LO5.3)
Investment A
Rate of return = ((F.V/P.V)^(1/n) – 1)*100%
= ((4600/2500)^(1/8)-1)*100%
= 7.92%
Investment B
Rate of return = ((F.V/P.V)^(1/n) – 1)*100%
= ((5250/2500)^(1/12)-1)*100%
= 6.38%
Hence, Investment A has higher Returns.
Solution 18 (LO5.7)
Company should report Interest rate either 21% p.a. compounded monthly.
EAR = (((1+1.75/100)^12) – 1)*100%
= (1.2314-1)*100%
= 23.14%
Solution 14 (LO2.1)
Income Statement
Particulars
20XX ($)
20XX ($+1)
Sales
1145
1200
Cost of Goods Sold
450
537
695
663
Interest
85
96
Depreciation
128
128
Other Expenses
110
98
Profit before Tax
372
341
Less: Provision for Tax
111.60
102.30
Profit after Tax
260.40
238.70
Less: Dividend
100
110
Retained Earnings
160.40
128.70
Balance Sheet
Particulars
20XX ($)
20XX ($+1)
Equities (Bal Fig)
5,201.40
5,187.70
Non - Current Liability
2,349
2,666
Notes Payable
122
103
Accounts Payable
664
659
Dividend...