# Finance Essay

301 WordsApr 6, 20152 Pages
Last Name: Cao Student Number: 10768750 Week no: 1 Tutorial group no: 14 Solutions to questions tutorials CH 2: 8 a. Market capitalization 2009 =10.5 × \$10.80 per share=\$113.4 billion Market capitalization 2010 =10.6 × \$17 per share=\$180.2 billion Change market capitalization =180.2-113.4=\$66.8 billion b. Market-to-book ratio 2009 =113.4105=1.08 Market-to-book ratio 2010=180.2116=1.55 Change =1.55-1.08=0.47 c. Enterprise value 2009 =113.4+524-48=\$589.4 billion Enterprise value 2010 =180.2+410-84=\$326 billion Change in enterprise value =326-589.4=-\$263.4 billion CH 3: 10 a. A: -10+\$201.1=\$8.18 B: 5+\$51.1=\$9.55 C: 20-\$101.1=\$10.91 b. It should choose project C, its NPV is the highest. c. It should choose project B and C, because its sum of NPV is highest. 11. a. Supplier 1: \$100,000+10,000×\$101.06=\$194,339.62 Supplier 2: \$21×10,0001.06=\$198,113.21; the difference in their offers today =\$198,113.21-\$194,339.62=\$3773.59; the firm should take offer from supplier 1, because the cost is lower. b. The firm can borrow from a bank with an interest rate of 6%. Borrow today \$100,000; in one year =\$100,000×1.06=\$106,000; \$106,000+\$10×10,000=\$206,000; still profitable compare to offer from supplier 2 which costs \$210,000. 17. a. No- arbitrage price=\$94+\$85=\$179 b. \$500 in two years means 5 times security that pays \$100 in two years. So, the no-arbitrage price is \$94+5×\$85=\$519 c. \$942+\$85-\$130=\$2, the arbitrage opportunity is available for \$2 per