Question 1

What is the current market price of each $100 face value bond of HK's long-term debt issue? Round your final answer to two decimal places.

Question 2

What is the required rate of return on HK's common shares if internally generated funds will be sufficient to finance the equity portion of any new financing and:

a) the capital asset pricing model (CAPM) is used to determine the shares' required rate of return?

b) the constant-growth dividend discount model is used to determine the shares' required rate of return?

Question 3

What is HK's weighted average cost of capital (WACC), assuming its cost of common equity will be determined using the CAPM and it will issue new common shares? Round market values to the nearest thousand. (Treat the yield on debt as an annual rate for this purpose.)

Question 4

HK's senior management has decided to finance the new Motor Vessel division exclusively using new common equity. One proposal put forward was to make a rights offering. Explain what a rights offering entails and give one reason why this would be considered.

Question 5

Is the decision to raise approximately $20 million to finance the new division exclusively using new equity likely to affect HK's WACC? Explain why or why not in terms of financial leverage, component costs, and capital structure. What is the likely impact? (Note: A recalculation of the WACC is not required for this question.)

Question 6

From the firm's perspective, there are a number of advantages and disadvantages associated with using long-term debt and common equity as sources of financing. Identify one advantage and one disadvantage each for long-term debt and common equity.

Question 7

If a market is informationally efficient, should it respond to an announcement of HK's intention to expand into the motor vessel market, and if so, how should it respond?

Question 8

The financial executive has three fundamental roles. Use the details of HK's proposal to illustrate each of these three roles.

Question 9

The two primary alternatives to the NPV method for evaluating investment projects are the internal rate of return (IRR) method and the payback period (PBP) method.

a) Describe the IRR method and the PBP method.

b) Identify one advantage and one disadvantage each for the IRR method and the PBP method.

c) Which of the three capital budgeting methods?NPV, IRR, andPBP?is conceptually preferable? Explain why.

6. Material selection plays a big role throughout engineering and is especially important in aerospace engineering. The following questions relate to material properties and the use of materials in aerospace applications. (a) State two examples of mechanical properties, other than ductility and brittleness, which can be used in material selection. [1 Mark] (b) State two examples of non-mechanical material properties that can be used in material selection. [1 Mark] (c) What is the definition of ductility? [1 Mark]1. (a) Explain what is meant by the transition probability matrix of a homogeneous Markov chain. [5 marks] (b) Explain what is meant by the stationary distribution of a Markov chain? [5 marks] (c) A Markov chain has transition probability matrix, A, with entries Ouj; and stationary distribution . Write down an expression for the entries of the reverse Markov chain. [5 marks (d) Consider the following transition probability matrix of a homogo- neous Markov chain, with three states i,j and k (the TPM is in that order). If the stationary vector of the chain is (1/9, 2/9, 2/3), determine whether the Markov chain is reversible. 1 /0.2 0.2 0.6 0.1 0.6 0.3 4 \\0.1 0.1 0.8 [5 marks] (e) Let X1, X2, Xa be a sequence of random variables resulting from the above Markov chain. If X1 = i and Xs = j what is the probability that X2 = k? [5 marks]QUESTION 22 Which of the following is not a property of the normal distribution? The normal distribution is a bell-shaped, symmetric, and continuous curve. As the S.D. of a normal distribution decreases, it becomes wider and more spread out. The center of the normal distribution is the mean. The normal distribution curve never touches the x-axis.Question 13 (1 point) In 2019, the national high school graduation rate was 84.6% . Then, in a random sample of 50 people, taken in 2019, the number of people who 9 graduated from high school follows 11 12 O A) Normal distribution. 14 15 B) continuous distribution. OC) binomial distribution. 17 OD) uniform distribution