Business and Finance essay questions help

  

Answer these questions
and put the number of the question and its answer number. Answer each question
as essay from q 1 through q8. The problems answer it as finance solution.
1. Because there is inflation of 4%, the central
bank intervenes and decreases the money stock by 7%. Interest rates rise by 1%,
or 100 basis points. Eventually, the intervention lowers the GDP and the
interest rates as well as inflation. The GDP, in fact, decreases by 1.5%, the
inflation rate becomes 1%, and the interest rates drop by 1.7%, or they fall
from the initial level by70 basis points (.7 %.) Divide the analysis into two
areas. First, address the initial effect on the bond and the stock market. Second,
discuss both, after the effects have worked themselves out as I have indicated
above.
2. Expound on an
expansion in GDP and the effects on the stock market and bond market in two
different cases. First, the economic growth does not induce inflation. Second,
the economic expansion causes substantial increase in inflation. Specifically,
the GDP rises by 2.5% and the inflation rises by 5.5%.
3. How do we forecast
GDP? Explain the different components of it and the determinants of those
components.
4. What tools have we
got to foretell the values of the portions of the GDP?
5. Analyze the defense
industry versus the digital mobile device industry in terms of
a) Structure
Ascertain that you
include population, income, regulation and technology.
b) Competition
c) Business cycle
6. We have two
individuals whom we have to advise about investments. The one is a twenty three
year old who has gotten a job in investment banking and is receiving 150 k
annually. The other is an eighty year old woman, Ms. Brown, who has $10 million
in assets, as well as owns her house mortgage free. The expenses to sustain
herself is 30k for her house costs and 45 k for all other costs. She has 2
children, and she wants to pass as many of her assets to them. Assume their
return objectives and their risk profiles and recommend the appropriate
investments for them.
7.a) Talk about two
concepts to tell us about prospects of the firm.
b) Talk on the
drawbacks of using ROE as a performance measure.
8. Define risk.
Elaborate on the different cases of bheta. Explicate the 3 factors which affect
it.
  B.
PROBLEMS
1. Cummings has EAT,
depreciation expense, capital expenses, debt and debt principal payments of
$9m, $2.8m, $1.3m,  $40m and $1.5m respectively.
Between the first and the second years, it has current assets of $11m and
$13.4m and current debts of $5m and $6.1m respectively. Its unlevered bheta,
D/E and t are 3, 40/60 and .4 respectively. The t bond rate is 2% and the risk
premium is 8% and its sales are $90m. Cummings plows about 30% of its profits
back into its business.  Derive the value
of Cummings, if the growth rate continues perpetually.
2. We know the following about Mansur. Total
assets are $1000m, E is $700m, cash is $100m and the # of shares is 1m. We
estimate that the market value of equity is 2 times the book value of it.
Finally, a fire sale of the firm would bring 70% of the value to the co.
Compute the book value, liquidation value, replacement value and enterprise
value per share of Mansur.
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Answer these questions and put the number of the question and its answer number. Answer
each question as essay from q 1 through q8. The problems answer it as finance solution.
1. Because there is inflation of 4%, the central bank intervenes and decreases the money
stock by 7%. Interest rates rise by 1%, or 100 basis points. Eventually, the intervention
lowers the GDP and the interest rates as well as inflation. The GDP, in fact, decreases by
1.5%, the inflation rate becomes 1%, and the interest rates drop by 1.7%, or they fall from the
initial level by70 basis points (.7 %.) Divide the analysis into two areas. First, address the
initial effect on the bond and the stock market. Second, discuss both, after the effects have
worked themselves out as I have indicated above.
2. Expound on an expansion in GDP and the effects on the stock market and bond market in
two different cases. First, the economic growth does not induce inflation. Second, the
economic expansion causes substantial increase in inflation. Specifically, the GDP rises by
2.5% and the inflation rises by 5.5%.
3. How do we forecast GDP? Explain the different components of it and the determinants of
those components.
4. What tools have we got to foretell the values of the portions of the GDP?
5. Analyze the defense industry versus the digital mobile device industry in terms of
a) Structure
Ascertain that you include population, income, regulation and technology.
b) Competition
c) Business cycle
6. We have two individuals whom we have to advise about investments. The one is a twenty
three year old who has gotten a job in investment banking and is receiving 150 k annually.
The other is an eighty year old woman, Ms. Brown, who has $10 million in assets, as well as
owns her house mortgage free. The expenses to sustain herself is 30k for her house costs and
45 k for all other costs. She has 2 children, and she wants to pass as many of her assets to
them. Assume their return objectives and their risk profiles and recommend the appropriate
investments for them.
7.a) Talk about two concepts to tell us about prospects of the firm.
b) Talk on the drawbacks of using ROE as a performance measure.
8. Define risk. Elaborate on the different cases of bheta. Explicate the 3 factors which affect
it.
B. PROBLEMS
1. Cummings has EAT, depreciation expense, capital expenses, debt and debt principal
payments of $9m, $2.8m, $1.3m, $40m and $1.5m respectively. Between the first and the
second years, it has current assets of $11m and $13.4m and current debts of $5m and $6.1m
respectively. Its unlevered bheta, D/E and t are 3, 40/60 and .4 respectively. The t bond rate
is 2% and the risk premium is 8% and its sales are $90m. Cummings plows about 30% of its
profits back into its business. Derive the value of Cummings, if the growth rate continues
perpetually.
2. We know the following about Mansur. Total assets are $1000m, E is $700m, cash is
$100m and the # of shares is 1m. We estimate that the market value of equity is 2 times the
book value of it. Finally, a fire sale of the firm would bring 70% of the value to the co.
Compute the book value, liquidation value, replacement value and enterprise value per share
of Mansur.

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