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A risk manager is reviewing the current holdings of a portfolio of investments. If the portfolio had been held over the past 3 years (750 business days), the worst 10 losses would have been 377.5, 280, 2201, 124, 666.67, 756, 897, 5645, 435, 3689. The current one day VAR using a 3 year lookback at the 99% confidence level is 406.25.
The manager is considering a $10mm portfolio of 2 assets. The first asset is in the amount of $3.5mm and the std deviation of 7.5%. The second asset is in the amount of $6.5mm and has a standard deviation of 4%. The correlation coefficient, rho, between the 2 assets is 0.31. What is the standalone VAR of each asset at the 95% confidence level? If it is less than the sum of the 2 standalone VARs, explain why.
Propulsion Labs will acquire new equipment that falls under the five-year MACRS category. Calculate the net present value.
Explain why sunk costs should not be included in a capital budgeting analysis,
Cookie Dough Manufacturing has a target debt-equity ratio of 0.5. Its cost of equity is 15 percent, and its cost of debt is 11 percent. What is the firm's WACC given a tax rate of 31 percent?
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 6..
The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.55 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Investors require a return of 14 percent on the company's stock. What ..
Cash dividends of $60,750 were paid to shareholders during Year 2. Prepare a statement of cash flows using the direct method.
Newton Company is privately owned by four individuals. The company sells athletic shoes, clothing, and accessories. An existing piece of equipment that keeps breaking down must be replaced. Management has asked for your opinion about how to finance t..
Suppose that the ratio of the price levels of a typical consumption basket in the United States versus Switzerland is 1 to 1.5 and the currenct exchange rate is $0.62 per swiss franc. the one year interest rate is 2 percent in the united states and 4..
The next dividend payment by Halestorm, Inc., will be $2.12 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. If the stock currently sells for $43 per share, what is the required return?
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Calculate incremental IRR for the cash flow.
Write an essay of 1000 words of why the capital market is so important to you?
A corporation is considering issuing long-term debt. the debt would have a 30 year maturity and a 10 percent coupon rate and annual payments. the bonds will be sold for $950. additionally, the firm would have to pay floatation costs of 5 percent. the..
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