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YOU DDSEI'VE the fDII-DMHQ inton'netion HDOLII three SIOCHS A. B and C. Assume that for these stocks a 2-factor Arbitrage Pricing Theoryi (APT) model (with Bu and u being the sensitivities of the asset retums to the respective factors) holds. You then find a fourth stock D in the market as follows Expected Return it tit; 15% 1.0 t] a. Demonstrate with relevant calculations given the information aboyer whether stock D is correctlyr priced [Assuming the 2-factor APT is the right asset pricing model in this market}. b. If it is not correctly priced, then provide details [including any calculations) of an arbitrage trading strategy you would employ to earn arbitrage profits. please put full calculations and formulas. Show transcribed imag e text You anticipate that you will have a signicant liability of 5 million one three years from now. The term structure is currentty at at 3%. You can invest In one or both of the following have annual ooupon paying bonds to protect yourself against Interest rate risk: - Bond A: a three-year bond with a coupon rate of 9% - Bond 3: a veyear bond with a coupon rate of 3% Each bond has a yield to maturity of 3% and a face value of E 1.0m. Also. assume that duration is a perfect measure of interest rate risk. a. If the two bonds are to be combined to form a portfolio that 1.Ivill provide you with protection against interest rate risk, what should be the weights of bond A and bond E in the portfolio? lo. How many of the bonds A and B would you need to buy in order to construct this portfolio? please put all the calculation and formulas. Show transcribed image text Chiare Nate University Prefertion Management (1240) Spring IS Exam Tera J. The following data are annual disposable Income and intal amental cuntumption four Is families selected at a random from a large metropolitan area Regard annual disposable income as the explanatory variable aint total annual consumption as the dependent variable. From the regression ofy on E, answer the questions that follow Annual Disposable Total Annual Income (5) (x) Consumption ($] [v) INC CON'S 14.000 30.000 24.545 43,000 36,776 70,000 63,254 56,DO0 40,176 50,000 49.548 16,000 16,000 26000 22.386 14,000 16,032 12,000 12,000 24,000 20.768 34,780 ulate the following: Slope ( by) Y-Intercept (bal Cumulative Sum of Forecast Error (CFE) Mean Square Error (MSE) Standard Deviation What is the sample regression equation relating sales to advertising? If ADV Increases by $ 1000, what would be the resulting change your prediction of SALES?11]. A proposed project lasts three years and has an initial investment of $200,000. The aftertax cash ows are estimated at 360,000 for year 1, $120,000 for year 2, and $135,000 for year 3. The rm has a target debtfeq uity ratio of 1.2. The rm's cost of eo uityr is 14% and its cost of debt is 9%. The tax rate is 34%. What is the NP'tIr of this project? A. 612.30 B. $13.63? C. 53?}23 0. 346,120 E. 551136 168. Daniel's Enterprises has a beta of 1.93 and a growth rate of 12 96. The stock is currently selling for $12 a share. The overall stock market has an 11 91': rate of return and a risk premium of 3 %. What is the expected rate of return on Daniel's Enterprises stodc? A. 10.00 96 E. 16.36 % C. 16.6? % D. 13.34 % E. 19.06 91': 134. The common stock of a firm is currerrtly priced at $53 a share. The company paid 51.40 in common dividends last year and expects to increase this amount by 3% annually. The stock has a beta of 1.40, which is about equal to its industry average. Given this information, what is the cost of equity nancing? A. 3.31% 3. 6.64% C. 6.10% D. 630% E. 3.01% Question 2: Firms Consider a rm that produces output lr'frorn capital K and labour N\" using the production technology,' 1' : FILM\") = KEN" )5. The nn's capital endowment is given as K=5t1 labour is hired to maximize prots. At a wage rate iv. the rm's labour costs are will\". The t'mn's profit (as a Emotion DEM] is therefore nae} = new\" }-ivN" = some\" )5 wN". 1. Find the rm's labour demand oietion by maximizing prots and solving the rst- order condition for the wage rate on 2. Plot the labour demand curve [M on the horizontal axis, to on the vertical axis}. 3. 1|h'ii'hat wage rate would the rm be willing to pay if it were to hire \"=3 units of labour? (Use your labour demand function!) 4. What would the lm's prot be in this case? {Use the prot function!) Hansell Company expects its trial balance on June 30 to be as follows: HANSELL COMPANY Budgeted Trial Balance June 30, 2019 Debit Credit Cash $ 30.000 Accounts receivable 60,000 Allowance for bad debta $ 2.600 Inventory 18 , 600 Plant, property, and equipment 483,600 Accumulated depreciation 238, 100 Accounts payable 70, 700 Wages and salaries payable 17,900 tote payable 149,200 Stockholders equity 113,700 Total $ 592, 200 0 592, 200 Typically, cash sales for Hansell represent 20%% of sales while credit sales represent 80%. Credit sales terms by the company are 2/10, 1/30. Hansell blils customers on the first day of the month following the month of sale, Experience has shown that 60% of the company's billings will be collected within the discount period, 25% by the end of the month after sales, 10% by the end of the second month after the sale, and 5% will ultimately be uncollectible. The company writes off uncollectible accounts after 12 months, The purchase terms for materials are 2/15, n/60. Hansell makes all payments within the discount period. Experience has shown that 80% of the purchases are paid in the month of the purchase and the remainder are paid in the month immediately following. In June 2019, the firm budgeted purchases of $18,900 for Dura-1000 and $16,500 for Flexplas. Variable manufacturing overhead is budgeted at $900 per batch (of 100 units) plus $80 per direct labor hour. In addition to variable overhead, the firm has a monthly fixed factory overhead of $37.800, of which $7.800 is depreciation expense. The firm pays all manufacturing labor and factory overhead when incurred.Total budgeted marketing, distribution, customer service, and administrative costs for 2019 are $2,534,000. Of this amount, $895,000 is considered fixed and includes depreciation expense of $90,000. The remainder varies with sales. The budgeted total sales for 2019 are $4 million. All marketing and administrative costs are paid in the month incurred. Management desires to maintain an end-of-month minimum cash balance of $30,000. The firm has an agreement with a local bank to borrow its short-term needs in multiples of $1,000 up to $100,000 at an annual interest rate of 12% Borrowings are assumed to occur at the end of the month, Bank borrowing at July 1 is $0. Required: Using the information presented above: 1. Prepare the cash budget for July 2019. 2. Prepare the budgeted Income statement for July 2019. (Assume that the company uses a LIFO cost-flow assumption.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the cash budget for July 2019. (Round your answers to the nearest whole dollar amount.)Prepare the cash budget for July 2019. (Round your answers to the nearest whole dollar amount.) HANSELL COMPANY Cash Budget For July 2019 Cash balance, beginning (given) Cash flow from operations: + Collections of receivables from credit sales in June: Cash disbursements: Materials purchases - June Materials purchases - July