Sample Final Exam Essay Example for Free

Sample Final Exam Essay The company currently has earnings per share of $8. 25. The company has no growth and pays out all earnings as dividends. It has a new project which will require an investment of $1. 60 per share today (at time zero). The project will increase the earnings by $0. 40 per share indefinitely starting one year after the investment. Investors require a 10 percent return on XYZ stock. Assume the firm just paid the dividend of $8. 25 yesterday. a) What is the value per share of the company’s stock assuming the firm does not undertake the investment opportunity? 5 pts) b) If the company does undertake the investment what is the value per share now? (10 pts) c) What will the value per share be 3 years from now? (5 pts) Solution: a) P = Dividend / R = 8. 25 / 0. 1 = $ 82. 5 b) NPVGO = (-1. 60 + 0. 40 / 0. 1) = $ 2. 40 So the stock price will be: 82. 5 + 2. 40 = 84. 90 c) (8. 25 + 0. 40) / 0. 1 = 86. 5 Question 3 – Portfolio Variance Suppose the expected returns and standard deviation of stocks A and B are E(Ra) = 0. 13, E(Rb) = 0. 19, ? a = 0. 38, ? b = 0. 62 respectively. ) Calculate the expected return and standard deviation for a portfolio that is composed of 45 percent A and 55 percent B when the correlation coefficient between the returns on A and B is 0. 5 (10 pts) b) How does the correlation coefficient between the returns on A and B affect the standard deviation of the portfolio? (3 pts) c) Provide a range for the correlation coefficient where we obtain diversification benefits. (i. e, The portfolio standard deviation is less than the weighted average of the individual standard deviations of the stocks? ) Provide a range where we don’t have diversification benefits. 3 + 2 pts) d) For some values of correlation coefficient, we can achieve a portfolio standard deviation of almost zero. TRUE or FALSE? ( 2 pts) Solution: a) The expected return of the portfolio is the sum of the weight of each asset times the expected return of each asset, so: E(RP) = wAE(RA) + wBE(RB) E(RP) = . 45(. 13) + . 55(. 19) E(RP) = . 1630 or 16. 30% The variance of a portfolio of two assets can be expressed as: ([pic] = w[pic]([pic] + w[pic]([pic] + 2wAwB(A(B(A,B ([pic] = . 452(. 382) + . 552(. 622) + 2(. 45)(. 55)(. 38)(. 62)(. 50) ([pic] = . 20383 So, the standard deviation is: (P = (. 20383)1/2 = . 4515 or 45. 15% b) As Stock A and Stock B become less correlated, or more negatively correlated, the standard deviation of the portfolio decreases. c) corr lt; 1 (strictly less), corr = 1 d) TRUE Question 4 – CAPM and SML Suppose that you observe the following information. Assume these securities are correctly priced. Beta Expected Return XYZ Corp: 1. 4 0. 150 ABC Corp: 0. 9 0. 115 a) What is the risk free rate and the expected return on the market? 3 + 3 pts) b) What is the expected return on an asset with a beta 1. 6? (4 pts) c) What is the beta on a portfolio consisting of 30% XYZ, 30% ABC, 20% risk free asset and 20% market portfolio? (5 pts) d) If a security has beta 1. 8 and expected return 18%, is this security above or below SML? Over or under priced? ( 2 + 3 pts) Solution: a) Here we have the expected return and beta for two assets. We can express the returns of the two assets using CAPM. If the CAPM is true, then t he security market line holds as well, which means all assets have the same risk premium. Setting the reward-to-risk ratios of the assets equal to each other and solving for the risk-free rate, we find: (. 15 – Rf)/1. 4 = (. 115 – Rf)/. 90 .90(. 15 – Rf) = 1. 4(. 115 – Rf) .135 – . 9Rf = . 161 – 1. 4Rf .5Rf = . 026 Rf = . 052 or 5. 20% Now using CAPM to find the expected return on the market with both stocks, we find: .15 = . 0520 + 1. 4(RM – . 0520). 115 = . 0520 + . 9(RM – . 0520) RM = . 1220 or 12. 20%RM = . 1220 or 12. 20% b) 5. 20% + 1. 6 (12. 20% – 5. 20%) = 5. 20% + 11. 20% = %16. 40 c) 0. 30 * 1. 4 + 0. 30*0. 9 + 0. 2*1 +0. *0 = 0. 89 d) According to SML 5. 20% + 1. 8 (12. 20% 5. 20%) = 5. 20% + 12. 60% = 17. 80%. The security is above SML. It is underpriced. Question 5 1). For a multi-product firm, if a projects beta is different from that of the overall firm, then the:Â  (4 pts) A. CAPM can no longer be used. B. project should be discounted using the overall firms beta. C. project should be discounted at a rate commensurate with its own beta. D. project should be discounted at the market rate. E. project should be discounted at the T-bill rate. 2). Jacks Construction Co. as 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8. 5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1. 1 and sells for $40 a share. The U. S. Treasury bill is yielding 4% and the market risk premium is 8%. Jacks tax rate is 35%. What is Jacks weighted average cost of capital? (8 pts) A. 7. 10% B. 7. 39% C. 10. 38% D. 10. 65% E. 11. 37% Re = . 04 + (1. 1 ( . 08) = . 128 Debt: 80,000 ( $1,000 = $80m Common: 4m ( $40 = $160m Total = $80m + $160m = $240m [pic]

S.W.O.T. Analysis of Boeing Corp. Essay -- SWOT Analysis

The objective of this paper is to analyze and discuss some of the Boeing Company's business decisions using their strengths, weaknesses, opportunities and threats, also known as an S.W.O.T. analysis which is defined as, "a planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats. (Nickels, McHugh, McHugh, page 216)". This is a very powerful tool usable by any business that is just starting out, going through a change in direction, or in the process of a major merger. The SWOT analysis consists of a few simple steps which can provide valuable insight for direction and decision making. This paper will use The Boeing Company as an example of SWOT analysis application. The Boeing Company originally started out as the Pacific Aero Products Co., which was founded on July 15, 1916. The name was changed about a year later to The Boeing Airplane Company. The Boeing Company stayed relatively small until World War I when they were selected by Navy officials to produce an order for 50 model C's planes for the war efforts. The company continued to prosper and by the late 1950s, Boeing President William Allen knew that the company had the scientists, the experience and the facilities to lead the company into uncharted territories. He was right, Boeing has emerged as the leading aerospace company in the world today. The SWOT process will start by examining the internal strengths of the Boeing Company of today. One of the most dominant strengths possessed by Boeing is its ability to follow the changes in a market that is continually changing. The type of products produced by The Boeing Company demands the use of state of the art technology while maintaining all the proper safe guards for sa... ...It is important to continually perform SWOT analysis and to stay nimble. Overall the Boeing Company has stayed strong in the aircraft field and with record profits for the past two years it looks like they are achieving their goals. Boeing has had to change their business direction over the past 100 years in order to stay a top of the aircraft industry. To maintain a good successful business they must have used a system similar to this SWOT analysis to see where Boeing needed to be to capitalize the market. Before Boeing decided that outsourcing was the way to go, a group of Boeing peers got around a table and weighed out the pros and cons. In their business analysis they saw a way to change one of their weaknesses, in-house work overload, into a potential strength. Major business decisions like this are much easier to commit too, with the use of a SWOT analysis.

CRM at Minitrex Essay

Implementation of CRM at Minitrex Introduction: Customer Relationship Management is a strategy to develop strong relationships with the customer and to know more about the customer needs. Stronger relationships with the customers will help in the development of the business. CRM helps in understanding the needs of the customers by gathering the information about the customers, and this helps to market and sell the company’s products. CRM makes the use of technology and human resources for the development of the business. By implementing CRM Better customer service can be provided. Sales staff can work effectively. Can discover the new customers and retain the existing ones. For the effective functioning of a CRM, first the organization should understand about their customers and should know their value for the life time. They should also know what their customer’s needs and should develop a strategy to meet those needs. The organization must look after how the information will be saved in the form of data and how it can be used. The stored information can be used for marketing purposes like mail campaigns, sales staff working for selling products, customer service calls etc. CRM links up all those details. Company analysts will look after each aspect and identifies the area that needs better services (Wailgum, 2014). CRM at Minitrex: Minitrex is a company with two major departments involving finance and insurance. George Degas is the director of sales at Minitrex. He appointed Harold Blufmen as the VP of insurance division and Mariella Hopkins as the head of the finance division. Credit administration system that works on the billing and payments of the customers and, General Management system that keeps track of the customers are the two back end systems for the insurance division. A management business centre application was developed by the Finance division in order to help the customer service representatives to track the sales and to provide support to the customers by providing online services like statements and applying for loans through online. Jon Bettman who is appointed as the VP of sales and marketing has created a customer contact system which schedules periodic calls to the customers, feeds data regarding the customers in the insurance and the finance division(Smith, H.A., et al., 2005). The problem at the Minitrex is that customers are receiving the calls multiple times from different sections of the company. In order to prevent this, Customer Relationship Management should be developed which stores all the data from different divisions. A business analyst should be appointed to look after all the data and he should look after the defects of the organization and should develop a strategy to overcome those problems. Sales man must be supported with the guidance by providing training on how to track sales and tracking the new leads of the sales. Team work should be maintained between all the members of the organization starting from the sales man to the head of the organization. All the contact information with the customers should be noted using the technological methods contact system management. Following these guidelines will help the company in implementing the CRM at Minitrex. REFERENCES: Jamalzadeh,M.M., Behravan, N.N., Markhali, A.,& Jouya, S. (2013). Customer Relationship Management Constructs Initiating Successful e- business Strategy for Service- based Companies. Journal of Applied Sciences, 13(1), 60-69. doi: 10.3923/jas.2013.60.69 Smith, H.A., and J. D. Mckeen. â€Å"CRM at Minitrex,† #9-L05-1-002. Queen’s School of Business, January 2005. Reproduced by permission of Queen’s University, School of Business, Kingston, Ontario. Wailgum, Thomas. â€Å"CRM Definition and Solutions.† CIO. Www.CIO.com, n.d. Web. 25 Mar. 2014.

Finance - 6839 Words

HELP University College Faculty of Business, Economics and Accounting Department of Business Studies INTERNAL SUBJECT OUTLINE Semester 3, 2011 FIN304 Global Financial Management Subject Lecturer / Tutor Mr. Mohd Jamil Jelani Telephone Fax Room Email 603-20961511 603-20957063 12, KPD Block B, Level 2 mohdjj@help.edu.my Class Contact Please refer to timetable Consultation Please call or email for appointment FIN304 Global Financial Management – Semester 3, 2011 SUBJECT DETAILS TEACHING STAFF Mr. Mohd Jamil Jelani is a Senior lecturer in banking and finance. 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