The start-up capital required is $5,000,000 lower than Plan B. Even though the variable costs are higher in Plan A, the reduced risk from a lower initial investment makes this option more palatable. Now that the decision to move forward with Plan A
The average performance of DFA large company value fund has very small difference with crsp cap decile #1. It is a little lower than S&P 500. It means the portfolio is diversified to eliminate unsystematic risk, but tracking error is also exist.The reason of the tiny difference may be timing or security selection. the tiny difference may be timing or security selection. What conclusions can you draw from all this?
As the project is twice as risky as the firm’s normal operations, it beta will be equal to 2 x 0.75 = 1.5: [pic] We will now use this required rate of return to calculate the NPV of the project: [pic] As the project has a positive NPV, it should be accepted. Question Five Consider an investment
* Cost of Equity: * Beta: she used the average beta of the last 5 years, which is also acceptable. However, we decide to use the Bayesian beta calculated with the firm’s present beta as a measure of the future beta assessing for future risk. * Risk-free rate: from the investor’s perspective, we conclude that a 10-year holding period would be more realistic estimate than 20-year. Therefore, we decide to use 10-year U.S. Treasury yield as our risk-free rate in this case. * Risk premium: using the geometric mean from 1926 to 1999 might be problematic, since the risk premium of recent decades is obviously lower than earlier (stated in the lecture).
Ratio | Formula | Amaon 2013 | eBay 2013 | Debt Ratio | TL/TA | | | In leverage ratio, I choose debt ratio, eBay is 24.6% while Amazon is 54.8%. In this ratio, eBay is lower than Amazon which means eBay has less debt should to pay than Amazon. EBay’s assets are financed more through equity than debt compare to Amazon, illustrated that eBay has a lower risk in operation. In addition, eBay may have more borrowing capacity and financial flexible to enlarge its business than Amazon. Let’s see some profitability ratio to have some in-depth discussion.
Therefore, the recommendation project which have higher rate of return than 25% is project B. 3.3 Net Present Value Project A Year | 11% Col. | Net Cash Inflow | Present Value of Net Cash Inflow | 1 | 0.901 | 7,500 | 6,757.5 | 2 | 0.812 | 7,750 | 6,293 | 3 | 0.731 | 8,000 | 5,848 | 4 | 0.659 | 7,750 | 5,107.25 | 5 | 0.593 | 7,500 | 4,447.5 | Total PV of Net Cash Inflow = $28,453.25 Less Investment =
However, in a Probit model the marginal effect is the defined by the coefficient multiplied by the G function. This means we are looking for the statistical significance of this combined partial effect not the statistical significance of the coefficient. This statistical significance is illustrated appendix 2.2 and we observe that resplast, weekslast, propresp and mailsyear are statistically significant at the 5% confidence level. However only the variable avggift was not statistically significant at the 5% confidence level
The advantage of this target capital structure offers the lowest cost of capital resulting from its tax deductibility. Krispy Kreme has the current Capital Structure, according to The Wall Street Journal: Total Debt to Total Equity 0.76 Total Debt to Total Equity 0.75 Total Debt to Total Assets 0.59 Interest Coverage 48.44 Long-Term Debt to Equity 0.63 Long-Term Debt to Total Capital 0.62 Long-Term Debt to Assets 0.00 The debt to equity ratio of .69 Krispy Kreme uses very little debt in its capital structure. Their current ratio is 2.51 and they have a quick ration of 2.14. Some companies that have little or no debt, even
#: 208030-PDF-ENG Analysis: The value of the Hertz Corporation calculated using discounted cash flow method is approximately $ 6.1 billion, whilst the final revised offer is $ 5.6 billion. The final offer of $ 5.6 billion is quite reasonable for the Hertz Corporation as it was considering that it would not be able to receive $ 5.4 billion earlier. The price is little lower than $ 6.1 billion but is quite reasonable. The possible impact of synergies after making several changes had reduced the costs and increased the profitability of the company. This had increased the price or value of the company and thus increased to $ 6.1 billion.
Suppose we are interested in comparing means from two independent samples. The mean of the first sample is 9 and the mean of the second sample is 17. Let’s assume that the two group means have the same standard errors, equal to 2.5. The 95 percent confidence interval for the first group mean can be calculated as: 9 ± 1.96 × 2.5 where 1.96 is the critical t-value. The confidence interval for the first group mean is thus (4.1, 13.9).