Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Management Theories Expert

problem: prepare a short essay of 350-400 words for each of the following problems. Where possible, illustrate with an appropriate ex in your answer. You must support your discussion with appropriate references.

a) ‘Risk aversion implies only risk-free investments will be undertaken by corporate managers’.
Critically evaluate this statement (indicate whether you agree or disagree in your answer).

b) What is the distinction between nominal and real interest rates? Why is this distinction important?

c) describe why evaluating mutually exclusive projects with IRR and NPV methods can be problematic.

problem:

a) John has invented a new household device that would earn him $10,000 per annum for the next 10 years. Given a rate of interest of 8% per year, would John be willing to sell his invention today for $100,000?

b) An investment will pay $200 at the end of each of the next 3 years, $300 at the end of year 4, $500 at the end of year 5 and $500 at the end of year 6. Given that other investments of equal risk earn 10% per annum, find out the present value and future value of this investment.

c) You intend to invest into a fund for a period of 10 years. Find the interest rate at which regular deposits of $1,000 will accumulate to $25,000 at the end of the investment period. The deposits are made at the end of every year. Estimate the interest rate using the interpolation method.

problem: The Crystal Glass Company is proposing the construction of a new plant in east Brisbane. The plant has an annual capacity of 100,000 tones and will cost $100 million to build. Profits on the plant will be taxed at a rate of 30 per cent. The company expects its new plant to produce 90,000 tones of plate-glass per year. The annual revenues of $59.4 million based on an anticipated selling price of $660 per tonne will allow the company to gain 12 per cent market share in the first year of operation. Fixed costs are expected to average $12 million annually while variable costs are estimated to be around $140 per tonne. The plant will be fully depreciated on a straight-line basis over ten years, with an estimated salvage value of $2 million at the end of the project. The required rate of return on the project is taken as 12 % per year due to the high degree of systematic risk associated with a cyclical product like plate-glass.

find out the NPV of the project and describe if the company should go ahead with the proposed project.

problem: Western Communications Ltd’s bonds will mature in five years with a total face value of $50 million, paying a half yearly coupon rate of 10% per annum. The yield on the bonds is 15% per annum. The market value for the company’s preference share is $5.0 per unit while the ordinary share is currently worth $3.0 per unit. The preference share pays a dividend of $0.5 per share. The beta coefficient for the ordinary share is 1.2 and retained earnings are expected to be more than sufficient to fund the ordinary equity component of any new investment. The market risk premium is estimated to be 13% per annum and the risk-free rate is 4% per annum. The company is subject to a 30% corporate tax rate. The balance sheet values for bond and equity are shown below:


a) describe the three steps involved in the calculation of cost of capital for Western Communications.

b) find out Western Communications’ after-tax weighted average cost of capital.

c) Western Communications is considering raising more capital for a new project. Should the company use more equity or debt?

In your answer, discuss the effect of using more equity or debt on the company’s cost of capital.

Management Theories, Management Studies

  • Category:- Management Theories
  • Reference No.:- M951

Have any Question? 


Related Questions in Management Theories

Think about one effective and one ineffective leader who

Think about one effective and one ineffective leader who you have encountered. Determine how each leader was effective or ineffective in his or her leadership styles and explain your reasoning with support from sources a ...

Foundations of complexitycomplexity theory the field of

Foundations of Complexity Complexity theory, the field of study of complex systems, is a relatively recent theory. It is a broad theory encompassing nine research traditions-an aggregation of principles, concepts, theori ...

Describe how government-supported big business during the

Describe how government-supported big business during the Reagan Era effected the U.S. economy and labor unions.

Questionthere are several types of networks while the

Question: There are several types of networks; while the concepts are the same, only the names of the elements change. A network is a set of nodes connected by links, for example. However, some of the academic literature ...

In this unit we learned about management organizational

In this unit, we learned about management, organizational structures, and open and closed systems. Write an essay in which you expand on the following topics: Describe management, organization, and leadership in relation ...

A how can use the criteria for evaluating alternative

a) How can use the criteria for evaluating alternative methods of government finance to assess the most important revenue proposals of the 2018/19 budget. b) In the case tax is most important revenue proposals of the 201 ...

Assignment -for this assignment analyze and discuss your

Assignment - For this assignment, analyze and discuss your personal leadership style. Based on your experiences, current readings, work experience, education, and use of self-assessment instruments describe what you thin ...

54 of public high school students are provided a computer

54% of public high school students are provided a computer by their school district. 40 students are selected at random. The random variable represents the number of students who have been provided a computer by their sc ...

Journal empowering your peopleinstructionsama style with

Journal: Empowering Your People Instructions: AMA Style with references! Journal entries are private between you and the instructor. In this course, journals are low stakes opportunities to submit small portions of your ...

Styles of leadershipinstructionsama style with

Styles of Leadership Instructions AMA style with references When preparing for your discussion post on this case, it is recommended that you read through it several times. Read through it the first time to familiarize yo ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As