Explain the payback period statistic

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Reference no: EM132275475

Respond to the following questions. Write your responses in a Word document. Use references to support your answers as needed. Be sure to cite all references using correct APA style. Your responses should be free of grammar and spelling errors, demonstrating strong written communication skills.

There are 9 papers, the large numbers, Please number all answers

Part 1

Define the terms finance and financial management. What are the major sub-areas of finance?

Identify and define the three basic forms of business ownership. Describe the advantages and disadvantages of each.

Define the terms agency relationship and agency problem. Explain three different approaches to minimizing the agency problem.

Explain why ethical behavior is so important in the field of finance.

Explain the concept of shareholder wealth maximization. Is there a conflict between the goal of shareholder wealth maximization and the financial manager's need to act in an ethical manner? Why or why not?

Part 2

Categorize each of the following transactions as taking place in either the primary or secondary market:

Supercorp issues $180 million of new common stock.

HiTech, Inc. issues $30 million of common stock in an IPO.

Megaorg sells $10 million of HiTech preferred stock from its marketable securities portfolio.

The XYA Fund buys $220 million of previously issued Supercorp bonds.

A. B. Corporation sells $15 million of XYZ common stock.

2. Identify whether the following financial instruments are capital market securities or money market securities:

U.S. Treasury bills.

U.S. Treasury notes.

U.S. Treasury bonds.

Mortgages.

Federal funds.

Negotiable certificates of deposit.

Common stock.

State and government bonds.

Corporate bonds.

3. Identify the different types of financial institutions. What are the main services each of these financial institutions offers?

4.Define the six factors that determine the nominal interest rate on a security.

5. Define the concept of term structure of interest rates. What are three theories that explain the future yield curve of interest rates?

Part 3

Explain the concept of cash flow in corporate finance.

Explain how present value and future values are related.

Explain how present values are affected by changes in interest rates.

Part 4

Explain whether you would you rather have a savings account that paid interest compounded on a monthly basis or compounded on an annual basis? Why?

Describe what an amortization schedule is and its uses. Explain the purpose of an amortization schedule.

Interest on a home mortgage is tax deductible. Explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years.

Explain the difference between an ordinary annuity and an annuity due.

Part 5

Describe the rights and advantages belonging to shareholders

Explain the differences between the Standard and Poor's 500 Index and the Dow Jones Industrial Average. Which is a better measure of stock market performance? Why?

Describe the differences between common stock and preferred stock.

Part 6

Explain what a call provision enables bond issuers to do. Why would bond issuers exercise a call provision?

Define a discount bond and a premium bond. Provide examples of each.

Describe the relationship between interest rates and bond prices.

Describe the differences between a coupon bond and a zero coupon bond.

Part 7

Define risk, and explain how it is measured.

Identify a source of firm-specific risk. What is the source of market risk?

Explain what the coefficient of variation measures.

Part 8

Explain why expected return is considered forward-looking. What challenges arise in using expected return?

Explain how differences in allocations between the risk-free security and the market portfolio can determine the level of market risk.

Part 9

Explain the net present value (NPV) method for determining a capital budgeting project's desirability. What is the acceptance benchmark when using NPV?

Explain the payback period statistic. What is the acceptance benchmark when using the payback period statistic?

Describe the internal rate of return (IRR) as a method for deciding the desirability of a capital budgeting project. What is the acceptance benchmark when using IRR?

Describe the modified internal rate of return (MIRR) as a method for deciding the desirability of a capital budgeting project. What are MIRR's strengths and weaknesses?

Reference no: EM132275475

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