Explain the concept of the stakeholder in contemporary finance.
5. (TCOs 3 and 5) You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? (Show your work.)
6. (TCO 3) A stock has a beta of 1.05, the expected return on the market is 12 percent, and the risk-free rate is 4 percent. What must the expected return on this stock be? (Show your work.)
7. (TCO 4) Suppose Pat, Ltd. just issued a dividend of $2.40 per share on its common stock. The company’s dividends have been growing at a rate of 5%. If the stock currently sells for $80.00, what is your best estimate of the company’s cost of equity? (Show your work.)
8. (TCO 4) Given the following information, calculate the weighted average cost for the Ban Corp. Percent of capital structure:Preferred stock 10%Common equity 70%Debt 20% Additional information:Corporate tax rate 34%Dividend, preferred $8.00Dividend, expected common $4.00Price, preferred $80.00Growth rate 5%Bond yield 7%Price, common $80.00 (Points : 40)
9. (TCO 7) What are some important factors to consider when conducting a credit evaluation and scoring?
10. (TCO 1) Explain the concept of the stakeholder in contemporary finance.
11. (TCO 6) What is the difference between diversifiable and non-diversifiable risk? Give examples of each.
efore there was Paris Hilton, there was Consuelo Vanderbilt Balsan – a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Now Ms. Balsan’s onetime Hamptons home is slated to hit the market priced at $28 million with Tim Davis of the Corcoran Group.
Located on Ox Pasture Road in Southampton, the shingle-style home was built around 1900 and is known as “Gardenside” or “Cara-Mia”. Ms. Balsan, the great-granddaughter of railroad magnate Cornelius Vanderbilt, owned the house until her death in 1964.
According to public records, the estate is owned by Robert G. Goldstein, executive vice president and president of global gaming operations at Las Vegas Sands Corp, and his wife Sheryl, who purchased the house in 2007 for $17.4 million.” (The Wall Street Journal, August 1, 2014, M2)
- Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number). Please show your work.
- Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.Please show your work.
- Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.Please show your work.
- Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?Please show your work.
- You were using the time value of money concept to answer the question #3. Think about the time line for that problem. What is the time point 0 in that problem? Please explain your answer.