...GB550 Financial Management Unit 1 Final Project Click Link Below To Buy: http://hwaid.com/shop/gb550-financial-management-unit-1-final-project/ Unit 1 Final Project Overview: The Final Project is due at the end of Unit 5. Overview The purpose of the Final Project Research Paper is to examine capital-structure theory, issues, and debates, while showing how capital-structure choices affect a firm’s return on investment (ROI) and its risk profile. Directions Your Assignment is to select a publicly-held company and to analyze its capital structure, applying the theories and principles found in Chapter 15 of the text. The structure of your research paper should include: • A preview of capital structure issues • Business and financial risks related to capital structure • Modigliani and Miller’s [MM] capital-structure theory • Criticisms of the MM model and assumptions • Capital structure evidence and implications • Estimating the firm’s optimal capital structure A firm’s optimal capital-structure is that mix of debt and equity that maximizes the stock price. At any point in time, management has a specific target capital structure in mind, presumably the optimal one, though this target may change over time. For example, financial management may choose a 50% equity financing [stock] and 50% debt [bond] financing. Several factors influence a firms’ capital structure, including: • Business risk • Tax position • The need for financial flexibility • Managerial...
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...Gb550: Financial Management Unit 6 Assignment GB550: Financial Management Alberto Silveira Kaplan University Prof: Ana Machuca April 11, 2011 Chapter 13: Problem 13-5: How is it possible for an employee stock option to be valuable even if the firm's stock price fails to meet shareholders' expectations? Solution: Employees are given the option of buying stocks at a specified time at a specified price without investing any money. For example, if the price of stock is $10 today and the employee is given the option to buy 1000 shares at the price of $10 per share two years from now. If the stock price increases to $12 per share in two years, then the employee will gain $2,000 ($2 x 1000) from these stock options. Let’s say that the expected capital appreciation was 20%, the value of the stock would have increased to $14.4 per stock. Even though the stock price fell short of the expected value, it still created additional income of $2,000 for the employee. The options pay off if, at the time of option expiration, the stock price is higher than the option’s strike price, even if the company failed to meet shareholders’ expectations. Chapter 15: Problem 15-8: The Rivoli Company has no outstanding debt and its financial position is given with the following data: Assets (book=market) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, P0 $15 Shares outstanding n0 200,000 Tax rate, T (federal plus state) 40% The firm is considering selling...
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...Tamisha McQuilkin Unit 4 Assignment GB550 Financial Management Dr. Prondzinski May 17, 2011 24-2 Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a correlation coefficient with the market of -0.25, and a beta coefficient of -0.5. Security B has an expected return of 11%, a standard deviation of returns of 10%, a correlation with the market of .75, and a beta coefficient of 0.5. Which security is more risky? Why? Using SML: rA= rrf + (rm – rrf)bi Security A is riskier because of its negative correlation to the market. Also its beta is negative causing to believe its risk will increase over time. 24-8 You are given the following set of data: Historical Rates of Return | | | Year | NYSE | Stock Y | 1 | 4.0% | 3.0% | 2 | 14.3 | 18.2 | 3 | 19 | 9.1 | 4 | -14.7 | -6.0 | 5 | -26.5 | -15.3 | 6 | 37.2 | 33.1 | 7 | 23.8 | 6.1 | 8 | -7.2 | 3.2 | 9 | 6.6 | 14.8 | 10 | 20.5 | 24.1 | 11 | 30.6 | 18.0 | | Mean = 9.8% | 9.8% | | σ = 19.6% | 13.8% | a. Construct a scatter diagram showing the relationship between returns on Stock Y and the market. Use a spreadsheet or a calculator with a linear regression function to estimate beta. β = 0.62 b. Give a verbal interpretation of what the regression line and the beta coefficient show about stock Y’s volatility and relative risk as compared with those of other stocks. This graph shows that stock Y’s volatility follows the basic trend of the market (NYSE). The regression...
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...Unit 6 Assignment GB550: Financial Management Alberto Silveira Kaplan University Prof: Ana Machuca April 11, 2011 Chapter 13: Problem 13-5: How is it possible for an employee stock option to be valuable even if the firm's stock price fails to meet shareholders' expectations? Solution: Employees are given the option of buying stocks at a specified time at a specified price without investing any money. For example, if the price of stock is $10 today and the employee is given the option to buy 1000 shares at the price of $10 per share two years from now. If the stock price increases to $12 per share in two years, then the employee will gain $2,000 ($2 x 1000) from these stock options. Let’s say that the expected capital appreciation was 20%, the value of the stock would have increased to $14.4 per stock. Even though the stock price fell short of the expected value, it still created additional income of $2,000 for the employee. The options pay off if, at the time of option expiration, the stock price is higher than the option’s strike price, even if the company failed to meet shareholders’ expectations. Chapter 15: Problem 15-8: The Rivoli Company has no outstanding debt and its financial position is given with the following data: Assets (book=market) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, P0 $15 Shares outstanding n0 200,000 Tax rate, T (federal plus...
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