Saint MBA570 Module 1 Discussion Latest November 2016
Module 1 Discussion
This discussion question for this module has two parts. Respond to both parts to receive full credit for this assignment.
Part 1: What is a hostile takeover and what generally happens to the stock price of the firm being acquired in a hostile takeover?
Part 2: How does a hostile takeover affect the company’s stakeholders (shareholders, executives, employees, and society in general)? Is it usually beneficial or detrimental to these stakeholders? Why?
Include some news that is less than a year old that discusses an in-process or recently completed merger in your answer. Briefly discuss the main issues in that merger and whom the merger is likely to benefit or hurt.
The ProQuest database at the Saint Leo University Library website can be a useful tool for completing this assignment. Click here for instructions on accessing ProQuest.
Hint: One way to find merger news is to use the library’s database for the Wall Street Journal and search for a recent article with the word “merger” in the title of the article.
Saint MBA570 Module 2 Discussion Latest November 2016
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Module 2 Discussion |
The Law of One Price states that equivalent investment opportunities trading in different competitive markets will have the same price. Yet, one can find examples where that rule seems to be violated. It is a well-known fact that Americans pay a much higher price for most prescription drugs than people in most other countries. Also, the price (when adjusted for exchange rates) for the same make and model of automobile varies greatly across different countries. Furthermore, the price of a barrel of crude oil varies between locations. For example, on October 12, 2012, the price for Brent crude oil produced in Europe was $114.21 and the price for West Texas Intermediate (WTI) crude oil produced in Texas was $91.86.
Do these three cases demonstrate that the Law of One Price is false? Why or why not?
Saint MBA570 Module 3 Discussion Latest November 2016
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Module 3 Discussion |
Respond to all of the questions to receive full credit for this assignment.
The capital budgeting process is important, but is it the most important process that a firm undertakes. Why or why not? If you believe there is a more important process, what is it and why do you think it is more important?
Saint MBA570 Module 4 Discussion Latest November 2016
Module 4 Discussion
This discussion question for this module has two parts. Please follow the directions carefully to receive full credit for this assignment.
Every year, Fortune magazine publishes a list of the “World’s Most Admired Companies” and Barron’s magazine publishes a list of the “World’s Most Respected Companies.” Choose one company from the top twenty on either of these lists from the most recent year available that you also admire or respect and one company that you admire or respect little.
Part 1: What criteria does the magazine use to evaluate companies for the list? Do you agree with these criteria? Why or why not?
Part 2: Why do you admire the company you chose as a favorite? Why do you not respect the company you chose as not admirable?
Both Barron’s and Fortune are available at the Saint Leo University Library website via the ProQuest database. Keep in mind that the most recent list available may be from last year.Click here for instructions on accessing ProQuest.
Saint MBA570 Module 5 Discussion Latest November 2016
Module 5 Discussion
This discussion question for this module has two parts. Respond to both parts to receive full credit for this assignment.
Part 1: There is evidence that small stocks and value stocks perform better over the long term than the market averages. What are some logical reasons for this phenomenon?
Part 2: There is strong evidence that many investors suffer from familiarity bias and overconfidence bias. Can you explain why these biases might exist? Can you think of a situation in which you might make these mistakes (if you hadn’t learned about these biases in this module)?
Include some news that is less than a year old that is applicable to this discussion.
The ProQuest database at the Saint Leo University Library website can be a useful tool for completing this assignment. Click here for instructions on accessing ProQuest.
Saint MBA570 Module 6 Discussion Latest November 2016
Module 6 Discussion
This discussion question has two parts. Respond to both parts to receive full credit for this assignment.
Part 1: Your friend is asking for advice. She is planning to retire in 40 years and wants to know what investments she should choose. She also wants to know if she should use an IRA or 401k or some other sort of retirement vehicle. Please advise her.
Part 2: You have another friend that already has a sizable amount saved for his retirement, but he wants to retire in 10 years. What type of advice would you give him about what type of investment to make and as to whether or not to use a retirement plan?
Include some news or advice from an article that is less than a year old that is applicable to this discussion.
The ProQuest database at the Saint Leo University Library website can be a useful tool for completing this assignment. Click here for instructions on accessing ProQuest.
Saint MBA570 Module 7 Discussion Latest November 2016
Module 7 Discussion
This discussion question has two parts. Use Figure 15.7 in your textbook which shows the net debt-to-enterprise value ratio for some select industries to answer both parts of the question. Respond to both parts to receive full credit for this assignment.
Part 1: Firms in the real estate investment trusts (REITs), airlines, electric utilities, and paper products industries tend to have high leverage. Explain why firms in these industries would prefer to have high leverage.
Part 2: Firms in the computer hardware, footwear, apparel and luxury goods, and data processing industries tend to have low leverage. Explain why firms in these industries would prefer to have low leverage.
Include some news from an article that is less than a year old that is applicable to this discussion.
The ProQuest database at the Saint Leo University Library website can be a useful tool for completing this assignment. Click here for instructions on accessing ProQuest.
Saint MBA570 Module 8 Discussion Latest November 2016
Module 8 Discussion
This discussion question has two parts. Respond to both parts to receive full credit for this assignment.
Part 1: Why do firms choose to make large increases in their dividends or start a stock repurchase program? Why would they choose one of these payout methods over another?
Part 2: Why do firms choose to cut or eliminate their dividends? What usually happens to the stock price of a company that does this?
Include some news or advice from an article that is less than a year old that is applicable to this discussion.
The ProQuest database at the Saint Leo University Library website can be a useful tool for completing this assignment. Click here for instructions on accessing ProQuest.
MBA 570
Writing Assignment 1 Instructions and Rubric
Instructions
The first writing assignment is due at the end of Module 3. You are advised to begin working on the first writing assignment during Module 1.
This writing assignment should be in an essay format. It should use two or more published news or academic articles which are less than a year old as cited references. In your essay, you should answer the following questions:
• What are value stocks?
• What are growth stocks?
• What is the reasoning that investors use for purchasing value or growth stocks?
• Has value or growth investing worked best over the long term?
• Do you prefer one of these investment methods? Justify your response.
• Find recent examples of news articles in which someone is described as a value or growth investor. How successful have they been with this method?
The essay will be in APA format and be 500-1,000 words in length (this range includes everything in the assignment including your name, title, and citations). Turnitin.com software will be used to ensure that submitted assignments are original works. See the rubric on the next page for complete grading criteria.
The ProQuest database at the Saint Leo University Library website can be a useful tool for completing this assignment. Click here for instructions on accessing ProQuest.
Hint: One way to find information for this assignment is to use the library’s database for the Wall Street Journal or Barron’s and search for a recent article with the words “value investor” or “growth investor” in the text of the article.
MBA 570
Writing Assignment 2 Instructions and Rubric
Instructions
The second writing assignment is due at the end of Module 6. You are advised to begin working on the second writing assignment during Module 4.
This writing assignment should be in an essay format. It should use two or more published news or academic articles which are less than a year old as cited references. This writing assignment addresses the values learning outcome (LO7) as detailed in the syllabus.
For this assignment, assume that you are a corporate manager that needs to make an important decision. Your company currently has its largest factory (700 employees) located in the Midwestern United States. This factory is currently not competitive in international markets and its poor results are threatening to force the entire company into bankruptcy. The company employs 3,000 in other areas of the U.S.
You have to decide whether to keep the factory where it is or move it to Canada or Ireland. You can only keep one factory open. The corporate tax rates of Canada (20%) and Ireland (15%) are much lower than the U.S. (35%). Labor costs will not change significantly because the cost of training new employees will be offset by the replacement of highly paid senior employees with younger employees in the other countries. The old factory needs extensive renovation which will still not leave it as efficient as the new factories planned for the new countries. Therefore, the NPV of the capital investments involved are equal for all three countries.
You have calculated the NPV of each choice. The NPV of keeping the U.S. factory open is $1,000,000. The NPV of moving the factory to Canada or Ireland is $10,000,000 and $35,000,000 respectively.
In this writing assignment, you should answer the following questions:
• Where should your factory be located? Why?
• Who are the stakeholders in this decision? How did you take the stakeholders into account when making your decision?
• How does your decision support responsible stewardship and integrity in the context of financial management?
The essay will be in APA format and be 500-1,000 words in length (this range includes everything in the assignment including your name, title, and citations). Turnitin.com software will be used to ensure that submitted assignments are original works. See the rubric on the next page for complete grading criteria.
Recent published news or academic articles are available in the ProQuest database at the Saint Leo University Library website. Click here for instructions on accessing ProQuest.
Question 1. Question :
You own 100 shares of a Sub Chapter “S” corporation. The corporation earns $5.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend) income is 30%, then how much money is left for you after all taxes have been paid?
$210
$300
$350
$500
EPS × number of shares × (1 – Individual Tax Rate) = $5.00 per share × 100 shares × (1 – .30) = $350
Question 2. Question :
A sole proprietorship is owned by:
one person.
two or more persons.
shareholders.
bankers.
Question 3. Question :
The most senior financial manager in a corporation is usually called the:
chief executive officer.
chief financial officer.
chief operating officer.
chairman of the board
Question 4. Question :
If you buy shares of Coca-Cola on the secondary market:
Coca-Cola receives the money because the company has issued new shares.
you buy the shares from another investor who decided to sell the shares.
you buy the shares from the New York Stock Exchange.
you buy the shares from the Federal Reserve.
Question 5. Question :
Which of the following is not a financial statement that every public company is required to produce?
Income Statement
Statement of Sources and Uses of Cash
Balance Sheet
Statement of Stockholders’ Equity
Question 6. Question :
Cash is a:
long-term asset.
current asset.
current liability.
long-term liability.
Question 7. Question :
If ECE’s stock is currently trading at $24.00 and ECE has 25 million shares outstanding and $100 million in shareholder equity, then ECE’s market-to-book ratio is closest to __________.
24
4
6
30
Market to Book = (MV Equity)/(BV Equity) = ($24 x 25 million)/$100 million = 6.0
Question 8. Question :
Which of the following statements regarding the income statement is incorrect?
The income statement shows the earnings and expenses at a given point in time.
The income statement shows the flow of earnings and expenses generated by the firm between two dates.
The last or “bottom” line of the income statement shows the firm’s net income.
The first line of an income statement lists the revenues from the sales of products or services.
Question 9. Question :
The DuPont Identity expresses the firm’s ROE in terms of:
profitability, asset efficiency, and leverage.
valuation, leverage, and interest coverage.
profitability, margins, and valuation.
equity, assets, and liabilities.
Question 10. Question :
Wyatt Oil has a net profit margin of 4.0%, a total asset turnover of 2.2, total assets of $525 million, and a book value of equity of $220 million. Wyatt Oil’s current return-on-assets (ROA. is closest to __________.
8.8%
9.5%
21.0%
22.8%
Question 1. Question :
Due to a pre-existing contract, Recycle America Inc. has the opportunity to acquire 10,000 pounds of scrap aluminum and 2,500 pounds of scrap lead for $10,750. If the current market price for scrap aluminum is $0.83 per pound and the current market price for lead is $1.06 per pound, then the added benefit (cost) to you if you acquire this metal is __________.
($200)
$200
($1,925)
$1,925
Question 2. Question :
If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 in one year or:
$235.85 today.
$250.00 today.
$265.00 today.
none of these.
Question 3. Question :
If the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between receiving $1,000 in one-year or:
$965.00 today.
$966.18 today.
$1,000.00 today.
$1,035.00 today.
Question 4. Question :
Which of the following statements regarding Net Present Value (NPV) is incorrect?
The NPV represents the value of the project in terms of cash today.
Good projects will have a positive NPV.
The NPV of a project is the difference between the present value of its benefits and the present value of its costs.
When faced with a set of alternatives, choose the one with the lowest NPV in order to minimize the preset value of costs.
Question 5. Question :
Suppose that Bondi Inc. is a holding company that owns both Pizza Hut and Kentucky Fried Chicken franchised restaurants. If the value of Bondi is $130 million, and the Pizza Hut franchises are worth $70 million, then what is the value of the Kentucky Fried Chicken franchises?
$60 million
$70 million
$130 million
Unable to determine with the information provided
Question 6. Question :
Suppose a security with a risk-free cash flow of $1,000 in one year trades for $909 today. If there are no arbitrage opportunities, then the current risk-free interest rate is closest to __________.
8%
10%
11%
12%
Question 7. Question :
Which of the following statements is false?
The process of moving a value or cash flow forward in time is known as compounding.
The effect of earning interest on interest is known as compound interest.
It is only possible to compare or combine values at the same point in time.
A dollar in the future is worth more than a dollar today.
Question 8. Question :
Nielson Motors is considering an opportunity that requires an investment of $1,000,000 today and will provide $250,000 one year from now, $450,000 two years from now, and $650,000 three years from now. If the appropriate interest rate is 10%, then Nielson Motors should:
invest in this opportunity since the NPV is positive.
not invest in this opportunity since the NPV is positive.
invest in this opportunity since the NPV is negative.
not invest in this opportunity since the NPV is negative.
Question 9. Question :
You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer’s financing deal, then your monthly car payments would be closest to __________.
$729
$822
$842
$647
Question 10. Question :
Which of the following statements is false?
The difference between an annuity and a perpetuity is that an annuity ends after some fixed number of payments.
Most car loans, mortgages, and some bonds are annuities.
A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever.
An annuity is a stream of N equal cash flows paid at irregular intervals.
Question 1. Question :
Consider a zero-coupon bond with a $1,000 face value and 10 years left until maturity. If the bond is currently trading for $459, then the yield to maturity on this bond is closest to __________.
7.5%
10.4%
9.7%
8.1%
Question 2. Question :
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. How much will each semiannual coupon payment be?
$60
$40
$120
$80
Question 3. Question :
Which of the following statements is false?
Bond prices converge to the bond’s face value due to the time effect, but simultaneously move up and down due to unpredictable changes in bond yields.
As interest rates and bond yields fall, bond prices will rise.
Bonds with higher coupon rates are more sensitive to interest rate changes.
Shorter maturity zero coupon bonds are less sensitive to changes in interest rates than are longer-term zero coupon bonds.
Instructor Explanation: CH8.2
Points Received: 10 of 10
Comments:
Question 4. Question :
Which of the following statements is false?
Investors pay less for bonds with credit risk than they would for an otherwise identical default-free bond.
The yield to maturity of a defaultable bond is equal to the expected return of investing in the bond.
The risk of default, which is known as the credit risk of the bond, means that the bond’s cash flows are not known with certainty.
For corporate bonds, the issuer may default; that is, it might not pay back the full amount promised in the bond certificate.
Question 5. Question :
Which of the following statements is false?
A common approximation is to assume that in the long run, dividends will grow at a constant rate.
The dividend each year is the firm’s earnings per share (EPS) multiplied by its dividend payout rate.
There is a tremendous amount of uncertainty associated with any forecast of a firm’s future dividends.
During periods of high growth, it is not unusual for firms to pay out 100% of their earnings to shareholders in the form of dividends.
Question 6. Question :
Von Bora Corporation (VBC) is expected to pay a $2.00 dividend at the end of this year. If you expect VBC’s dividend to grow by 5% per year forever and VBC’s equity cost of capital is 13%, then the value of a share of VBS stock is closest to __________.
$25.00
$40.00
$15.40
$11.10
Question 7. Question :
When discounting dividends you should use:
the weighted average cost of capital.
the after tax weighted average cost of capital.
the equity cost of capital.
the before tax cost of debt.
Question 8. Question :
Which of the following statements is false?
The total payout model allows us to ignore the firm’s choice between dividends and share repurchases.
By repurchasing shares, the firm increases its share count, which decreases its earning and dividends on a per-share basis.
The total payout model discounts the total payouts that the firm makes to shareholders, which is the total amount spent on both dividends and share repurchases.
In the dividend discount model we implicitly assume that any cash paid out to the shareholders takes the form of a dividend.
Question 9. Question :
Which of the following statements is false?
The fact that a firm has an exceptional management team, has developed an efficient manufacturing process, or has just secured a patient on a new technology is ignored when we apply a valuation multiple.
Valuation multiples have the advantage that they allow us to incorporate specific information about the firm’s cost of capital or future growth.
For firms with substantial tangible assets, the ratio of price to book value of equity per share is sometimes used.
Using multiples will not help us determine if an entire industry is overvalued.
Question 10. Question :
Which of the following statements is false?
The most common valuation multiple is the price-earnings (P/E) ratio.
You should be willing to pay proportionally more for a stock with lower current earnings.
A firm’s P/E ratio is equal to the share price divided by its earnings per share.
The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm’s future earnings and differences in the scale of firms’ earnings are likely to persist.
1. Question :
You are considering purchasing a new automobile that will cost you $28,000. The dealer offers you 4.9% APR financing for 60 months (with payments made at the end of the month). Assuming you finance the entire $28,000 and finance through the dealer, your monthly payments will be closest to __________.
$1,454
$527
$467
$457
Question 2. Question :
The effective annual rate for a credit card that charges a 19.9% APR compounded daily is closest to __________.
18.15%
19.9%
22.0%
24.2%
Question 3. Question :
If the current inflation rate is 4.2% and you are earning a real rate of return on an investment of 3.8%, then the nominal rate on this investment is closest to __________.
3.8%
4.2%
8.0%
8.2%
Instructor Explanation: (1 + real)(1 + inf) = (1 + nom) so (1 + real)(1 + inf) – 1 = nom; (1.038)(1.042) – 1 = .081596
Question 4. Question :
If the current inflation rate is 4% and you have an investment opportunity that pays 10%, then the real rate of interest on your investment is closest to __________.
10.0%
14.0%
6.0%
5.8%
Question 5. Question :
Which of the following statements is false?
U.S. Treasury securities are widely regarded to be risk-free because there is virtually no chance the government will default on these bonds.
In general, if the interest rate is r
and the tax rate is τ, then for each $1 invested you will earn interest equal to r and owe taxes of τ × r on the interest.
Investors may receive less than the stated interest rate if the borrowing company has financial difficulties and is unable to fully repay the loan.
Taxes reduce the amount of interest the investor can keep, and we refer to this reduced amount as the tax effective interest rate.
Question 6. Question :
When all investors correctly interpret and use their own information, as well as information that can be inferred from market prices or the trades of others, they are said to have:
sensation seeking expectations.
positive expectations.
rational expectations.
confident expectations.
Question 7. Question :
If investors believe that others have superior information which they can take advantage of by copying their trades, this can lead to:
an informational cascade effect.
a disposition effect.
a sensation seeking effect.
an overconfidence bias.
Question 8. Question :
The tendency to hang on to losers and sell winners is known as the:
cascade effect.
disposition effect.
overconfidence bias.
systematic behavior bias.
Question 9. Question :
According to a survey of 392 CFOs conducted by John Graham and Campbell Harvey, the most common method used in corporate America to estimate the cost of capital is:
the CAPM.
multifactor models.
characteristic models.
the dividend discount model.
Question 10. Question :
Which of the following statements is false?
If the market portfolio is efficient, then all securities and portfolios must plot on the SML, not just individual stocks.
For most stocks the standard errors of the alpha estimates are large, so it is impossible to conclude that the alphas are statistically different from zero.
It is not difficult to find individual stocks that, in the past have not plotted on the SML.
Small stocks (those with lower market capitalization) have lower average returns.
1. Question :
Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielson’s assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to __________.
-25.0%
-17.5%
-12.5%
12.5%
Question 2. Question :
Which of the following is not one of Modigliani and Miller’s sets of conditions referred to as perfect capital markets?
All investors hold the efficient portfolio of assets.
There are no taxes, transaction costs, or issuance costs associated with security trading.
A firm’s financing decisions do not change the cash flows generated by its investments, nor do they reveal new information about them.
Investors and firms can trade the same set of securities at competitive market prices equal to the present value of their future cash flows.
Question 3. Question :
Consider the following equation: E + D = U = A. The U in this equation represents:
the value of the firm’s equity.
the market value of the firm’s assets.
the value of the firm’s unlevered equity.
the value of the firm’s debt.
Question 4. Question :
Which of the following statements is false?
Since the publication of their original paper, Modigliani and Miller’s ideas have greatly influenced finance research and practice.
Modigliani and Miller’s Proposition I was one of the first arguments to show that the Law of One Price could have strong implications for security prices and firm values in a competitive market; it marks the beginning of the modern theory of corporate finance.
Modigliani and Miller’s Proposition I holds even with taxes and transaction costs.
The conservation of value principle for financial markets states that with perfect capital markets, financial transactions neither add nor destroy value, but instead represent a repackaging of risk (and therefore return).
Question 5. Question :
Kroger has EBIT of $2,035 million, interest expense of $510 million, and a 35% tax rate. The interest rate tax shield for Kroger is closest to __________.
$187 million
$332 million
$534 million
$179 million
Question 6. Question :
Which of the following statements is false?
Given a 35% corporate tax rate, for every $1 in new permanent debt that the firm issues, the value of the firm increases by $0.65.
The firm’s marginal tax rate may fluctuate due to changes in the tax code and changes in the firm’s income bracket.
Many large firms have a policy of maintaining a certain amount of debt on their balance sheets.
Typically, the level of future interest payments varies due to changes the firm makes in the amount of debt outstanding, changes in the interest rate on that debt, and the risk that the firm may default and fail to make an interest payment.
Question 7. Question :
KD Industries has 30 million shares outstanding with a market price of $20 per share and no debt. KD has had consistently stable earnings, and pays a 35% tax rate. Management plans to borrow $200 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. The present value of KD’s interest tax shield is closest to __________.
$130 million
$200 million
$400 million
$70 million
Question 8. Question :
Which of the following statements regarding recapitalizations is false?
With a recapitalization, even though leverage reduces the total value of equity, shareholders capture the benefits of the interest tax shield up front.
Some of the original shareholders, those that sell their shares, do not benefit from the interest tax shield involved in a recapitalization.
Leveraged recaps were especially popular in the mid- to late-1980s, when many firms found that these transactions could reduce their tax payments.
When a firm makes a significant change to its capital structure, the transaction is called a recapitalization.
Question 9. Question :
Which of the following statements is false?
The value of a firm is equal to the amount of money the firm can raise by issuing securities.
By reducing a firm’s corporate tax liability, debt allows the firm to pay more of its c
