work must be done on excel , show calculations and analysis

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work must be done on excel , show calculations and analysis


Instructions Please complete the following: · Problem P6-9 · Problem P6-17 · Problem P6-31 · Problem P7-20 · Problem P7-23 Carry all calculations to TWO decimal places to reduce rounding error, especially in multi-step problems. Remember to show all calculations. You must show your calculation and solution please see the example below. If you do not show how you arrived at your answers, you will not receive credit. Merely showing the formula without the calculations is not sufficient. The problems should be set up in columns or using other appropriate formats—do not hide all steps in formulas behind one answer. I must still be able to see how you arrived at the answer. EXAMPLE OF HOW WORK SHOULD LOOK General Instructions for Written Assignments Please only submit one Excel file with all problems included. Submit an Excel file, please put one problem on a separate worksheet within one file · Problem P6-9 Term structure: A one-year Treasury bill currently offers a 5% rate of return. A two-year Treasury note offers a 5.5% rate of return. Under the expectations theory, what rate of return do investors expect a one-year Treasury bill to pay next year? · Problem P6-17 Asset valuation and risk: Laura and Drake wishes to estimate the value of an asset expected to provide cash inflows of $3,000 per year for each of the next four years and $15,000 in five years. Her research indicates that she must earn 4% on low-risk assets, 7% on average-risk assets, and 14% on high-risk assets. a. Determine what is most Laura should pay for the asset if it is classified as (1) low risk, (2) average risk, and (3) high risk. b. Suppose that Laura is unable to assess the risk of the asset and wants to be certain she’s making a good deal. On the basis of your findings in part (a), what is the most she should pay? Why? c. All else being the same, what effect does increasing risk have on the value of an asset? Explain your answer in light of your findings in part (a) · Problem P6-31 Bond valuation and yield to maturity: Mark Goldsmith’s broker has shown him two bonds issued by different companies. Each has a maturity of five years, a par value of $1,000, and a yield to maturity of 7.5%. The first bond is issued by Crabble Waste Disposal Corporation and has a coupon rate of 6.324% paid annually. The second bond, issued by Malfoy Enterprise, has a coupon rate of 8.8% paid annually. a. Calculate the selling price for each bond b. Mark has $20,000 to invest. If he wants to invest only in bonds issued by Crabble Waste Disposal, how much of those bonds could he buy? What if he wants to invest only in bonds issued by Malfoy Enterprise? Round your answers to the nearest integer. c. What is the total interest income that Mark could earn each year if he invested only in Crabble bonds? How much interest would he earn each year if he invested only in Malfoy bonds? d. Assume that Mark will reinvest all the interest he receives as it is paid, and his rate return reinvested interest will be 10%. Calculate the total dollars that Mark will accumulate over five years if he invests in Crabbe bonds or Malfoy bonds. Your total dollar calculation will include the interest Mark gets, the principal he receives when the bonds mature, and all the additional interest he earns from reinvesting the coupon payments that he receives. e. The bonds issued by Crabble and Malfoy might appear to be equally good investments because they offer the same yield to maturity of 7.5%. Notice, however, that your answers to part (d) are not the same for each bond, suggesting that one bond is a better investment than the other. Why is that the case? · Problem P7-20 Book and liquidation value: The balance sheet for Gallinas Industries is as follows Additional information with respect to the firm is available: (1) Preferred stock can be liquidated at book value. (2) Accounts receivable and inventories can be liquidated at 90% of book value. (3) The firm has 10,000 shares of common stock outstanding. (4) All interest and dividends are currently paid up. (5) Land and buildings can be liquidated at 130% of book value. (6) Machinery and equipment can be liquidated at 70% of value. (7) Cash and marketable securities can be liquidated at book value. Given this information, answer the following: a. What is Gallinas Industries' book value per share? b. What is its liquidator's value per share? c. Compare, contrast, and discuss the value found in parts (a) and (b) · Problem P7-23 Integrative Risk and Valuation: Given the following information for the stock of Foster Company, calculate the risk premium on its common stock
Answered 3 days AfterFeb 02, 2024

Answer To: work must be done on excel , show calculations and analysis

Nitish Lath answered on Feb 05 2024
17 Votes
Solution P6-9
        Given is the following information
        1 year treasury bill rate of return (r1)    5%
        2 year treasury bill rate of return (r2)    5.50%
        Expected return on bill next yea
r    ((1+r2^2)/ (1+r1^2)) - 1
        Expected return on bill next year    ((1+0.55^2)/(1+0.05^2))-1
        Expected return on bill next year    (1.113025/ 1.05) - 1
        Expected return on bill next year    0.0600238095
        Expected return on bill next year    6.00%
Solution P6-17
        Given is the following information
        Cash inflows 1-4 years    $3,000    per year
        Cash inflows 5th year    $15,000
            Return
        Low-risk    4%
        Average risk assets    7%
        High risk assets    14%
    a.    Determination of present value of asset based on risk classification
        For the low-risk assets
        Present value of asset
        Year    Cash flows    Pvf @ 4%    Present value
        1    3000    0.962    2885
        2    3000    0.925    2774
        3    3000    0.889    2667
        4    3000    0.855    2564
        5    15000    0.822    12329
        Total value of asset            23219
        For the average risk assets
        Present value of asset
        Year    Cash flows    Pvf @ 7%    Present value
        1    3000    0.935    2804
        2    3000    0.873    2620
        3    3000    0.816    2449
        4    3000    0.763    2289
        5    15000    0.713    10695
        Total value of asset            20856
        For the high risk assets
        Year    Cash flows    Pvf @ 14%    Present value
        1    3000    0.877    2632
        2    3000    0.769    2308
        3    3000    0.675    2025
        4    3000    0.592    1776
        5    15000    0.519    7791
        Total value of asset            16532
    Requirement b
        Laura should take into account the worst-case scenario, which is the greatest required rate of return (in this example, 14% for high-risk assets), to make sure she is getting a decent deal without evaluating the risk. Thus, the asset's worth determined in part a for high risk is the highest price she should be willing to pay.
    Requirement c
        An asset's value is significantly impacted by its level of risk. The present value of...
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