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An oil and gas firm has a yearly net cash flow from operations that is distributed normally with a mean of $100 million and a standard deviation of $35 million. The firm pays an annual dividend of $50 million to its shareholders.
• What’s the firm’s Cash Flow at Risk (CFaR) if the confidence level is 97.5%, i.e., the cash flow loss relative to the mean, such that there is only a 2.5% chance of losing more than the mean cash flow minus the CFaR?
• How much cash and/or liquid assets would the firm need to keep on hand to pay the dividend if it were to suffer a shortfall equal to the VaR from part a)?
Hudson Co., a U.S. firm, has a subsidiary in Mexico, where political risk has recently increased. Hudson's best guess of its future peso cash flows to be received has not changed. However, its valuation has declined as a result of the increase in pol..
Fun Toy Corporation estimates that there is 30% chance of a recession economy next year, a 40% chance of a normal economy next year, and a 30% chance of a boom economy next year. what is the value of Fun Toy’s debt? what is the value of Fun Toy’s equ..
The Estrada Company uses cost-plus pricing with a 0.42 markup. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $3.80. In addition, the company incurs $179,700 in fixed costs annually. If demand falls t..
An investor creates a protective put position by buying one share of a stock at $50 and buying a European put option on the stock with strike price $45 at $1.25. What is his profit if he holds his position until maturity of the option and the stock p..
"Baldwin's Traditional product Basket finished 2019 with an awareness of 72%. One-third of Basket's existing awareness is lost every year. What is the minimum that Basket s product manager should spend in promotion to earn have an awareness level of ..
5 years ago, Barton Industries issued 35-year noncallable, semiannual bonds with a $2,000 face value and a 6% coupon, semiannual payment ($60 payment every 6 months). the bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, what ..
In a manufacturing process, the assembly line speed (feet per minute) was thought to affect the number of defective parts found during the inspection process.
Look up on a financial website what the cost of a round-trip transaction on $10,000 worth of shares in Dell would cost you today.
Titan Mining Corporation has 8.6 million shares of common stock outstanding and 300,000 5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.3, and the bonds have 15 yea..
Estimate the firm’s cost of capital. Estimate the value of the equity of the firm at the end of 2011.
There are 35,000 shares of stock outstanding with a market value of $32 a share. What is the price-earnings (P/E) ratio?
You want to add an additional stock to your portfolio and are considering two alternatives. For stock A, the expected return is 14.20% and the beta is 1.62. For stock B, the expected return is 8.40% and the beta is 0.46. According to the Capital Asse..
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