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You are valuing DistressCo, a company struggling to hold market share. The company currently generates $120 million in revenue, but its revenue is expected to shrink to $100 million next year. Cost of sales currently equals $90 million and depreciation equals $18 million. Working capital equals $26 million and equipment equals $120 million. Using this data, construct operating profit and invested capital for the current year. You decide to build an as-is valuation of DistressCo. To do this, you forecast each ratio (such as cost of sales revenues) at its current level. Based on this forecast method, what are operating profits and invested cpital expected to be next year? What are two critical operating assumptions (identify one for profits, and one for capital) embedded in this forecast method?
show that in this example VaR does not satisfy the subadditivity condition whereas expected shortfall does.
Find the present value of cash flow stream if the interest rate is 6 percent. The only capital investment needed for a small project is investment in inventory.
The sales price would be set at 1.5 times the variable cost per unit; the variable cost per unit is estimated to be $7.50; and fixed costs are estimated at $120,0000. What sales volume would be required to break even, i.e., to have EBIT = zero?
For the portfolio manager's expectation to be fulfilled, the prices of the stocks have to follow which of the above four patterns? What are the implications if the other patterns of stock prices occur?
If demand falls to 73,700 units and the company wants to continue to earn a 0.31 return, what price should the company charge.
Multiple set of questions on hedging and market contracts - What are the main disadvantages of hedging with futures contracts compared to hedging with forward contracts
You've collected the following information about Odyssey, Inc.:
whythe results are different at the different interest rates.
A 6.3 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
Assume that on November 1, the spot rate of the British pound was $1.58 and the price on a December futures contract was $1.59.
Suppose a U.S. treasury bond will pay $2,500 five years from now. If the going interest rate on 5-year treasury bonds is 4.25%, how much is the bond worth today?
Explain the difference in the cost of financing with foreign currencies during a strong-dollar period versus a weak-dollar period for a U. S. firm.
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