1) A 1 year long forward contract on the non dividend paying stock is entered into when stock price is= $40 and risk free interest rate is= 10% with continuous compounding
a) Compute forward price
b) 6 month later price of the stock is $45 and risk free interest rate is still similar. What are the forward prices and value of forward contract?
2) Is there anyone recognizable with Harvard case study Ameritrade for finance class? Determine what would be included in cash flow for company’s intended investments? Create a spreadsheet with about paragraph of description for your choices, and describe the volatility of stock prices of appropriate companies. You will require utilizing a spreadsheet for your computations. prepare a paragraph describing your conclusions.
3) Assume you have the investment opportunities given but only $90,000 available which projects would you choose?
PJ NPV Investment
1 5,000 10,000
2 5,000 5,000
3 10,000 90,000
4 15,000 60,000
5 15,000 75,000
6 3,000 15,000
4) A project has the forecasted cash flow of= $110 in year 1= $121 in year 2 the interest rate is= 5 % risk premium on market is= 10%, project has the beta of= .5 if you utilize constant risk adjusted discount rate what is:
a) The PV of project
b) Certainty Equivalent cash flow in year 1 and year 2
c) Ratio of certainty equivalent cash flows to expected cash flows from years 1 and 2.