Balance sheet problems.

1. On the notebook
Investors, creditors, shareholders, market analysist…
2. Starbuck, watch the assignment submitted
3. On the notebook
4. On the submitted assignment
5. On the submitted assignment
6. On the notebook

Income statement problems

1. On excel global page.
2. On the submitted assignment
3. On excel file.

Cash flow statement problems

1. Submitted assignment
2. Excel
3. Submitted
Es. Honda Motor company

Offer a reduction of the price of 2000, from 30000 to 28000

Sales rise up from 40000 to 55000, profit margin is 6000 per vehicle with the rebate. Cost and benefit?

Benefit = profit of 6.000*15.000 addition vehicles= 90 million

The cost of the rebate is that Honda will make less on the vehicles it would have sold

Cost= loss of 2.000 per vehicle * 40.000 vehicles that would have sold without rebate = 80 million

Thus, Benefit- cost= 90-80=10, offering the rebate looks attractive.

Also 6000*55000=330 million

8000*40000 =320 million

Rebate=discount.

Investment in Japan 1 million today with cash-flow of 114Y million in one year without risk. Suppose risk
free interest rate in the US is 4%, IN Japan is 2 and the current competitive exchange rate is 110Y per 1 $.
What is the NPV of the investment? Is this a good opportunity.

Cost = 1 million today

Benefit = 114 million in one year

114 million/ 1.02= 111.76 million

111.76 million /110Y= 1.016 million

NPV= 1.016-1 accetti perché è positivo

Non ha senso quello che hai detto, NPV in titolo americano risk free è 0.
Your firm has identified three potential investment projects. The projects and their cash flows are shown
here

What is the NPV=

A cash flow today -10 cash flow in one year 20 =8.18

B cash flow today +5 cash flow +5 in one year= +5+4.54 = 9.54

C cash flow today 20 cash flow in one year -10 +20-9.09=10.90

What is the NPV of each project? Il terzo

Il terzo e il secondo.

Xia corporation whole assets are 100.000 in cash and three projects that it will undertake, they are risk free
and have the following cash flows:

A -20.000 in 1 year 30.000

B -10.000 in 1 year 25.000

C -60.000 in 1 year 80.000

Invest any unused cash at the risk free of 10%. In one year all cash can be paid to investors and the
company will be shut down.

1. The NPV of the 3 projects?

a. -20.000+30.000/1.1= 7.272.72

b. -10.000+25.000/1.1= 12.727,2727

c -60.000+80.000/1.1= 12.727,2727

All the projects has positive NPV and the firm has enough cash so it should take them all.

2. what is the total value of all of the assets. 100+12+12+7=132.727.27

3. what cash flows will the investors in Xia receive? Based on these cash flows, what is the value of Xia
Today.

After taking the projects Xia will have 100-10-30-60=10 in cash left to invest at 10%.

Thus Xia’s cash flows in one year= 30+25+80+10*1.1= 146

Value of xia today = 146.000/1.1= 132.727,27

4. Suppose Xia pays any unused cash investors today rather than investing it. What are the cash flows
to the investors in this case? What is the value of Xia now?

Unused cash 10.000

Cash flows today = 10.000
In one year= 30+25+80=135
10+135/1.1= 132.727,72

5. Explain the relationship in your answers to part b,c,d.

Results from b,c,d are the same cause all methods value Xia’s asset today. Whether Xia pays out cash
now or invest it at the r.f investors get some value today, the point is that the firm can’t increase its
value by doing what investors can do by themselves (and is the essence of the separation principle)

Suppose H.P stock is currently trading on the NYSE with a bid price of 28.00 and an ask price of 28.10. At
the same time, a NASDAQ dealer posts a bid price of HPQ of 27.85 and a ask price of 27.95

Is there an arbitrage opportunity in this case? If so how would you exploit it?
there is an arbitrage opportunity. One would buy from the NASDAQ dealer at 27,95 and sell to NYSE
dealer at 28.00 making profit ad 0.05 per share.

Suppose the NASDAQ dealer revises his quotes to a bid price of 27.95 and ask a price of 28.05. Is there an
arbitrage opportunity now? Of so would you exploit it?

No arbitrage opportunity left.

What must be true of the highest bid price and the lowest ask price for no arbitrage opportunity to exist?

To eliminate any arbitrage opportunity, the highest bid price should be lower than the lowest ask price.

28 > 27.95
 28> 28.05

27.95

26/10/2021

4 year old mortgage (mutuo) outstanding on your house. You make monthly payments of 1.500. you have
just made the payment. The mortgage have 26 years to go (originally 30) Show the time-line from your
perspective. How would the timeline differ if you created it from the bank’s perspective?

0 1 1500 2 1500 3 1500 4 1500 e 26*12= 312 1500

From the bank perspective, the same with opposite signs.

Calculate future value of 2000

Five years interest of 5% per year-> 2.552

Ten years rate of 5% 3.257

Five years at interest of 10% 3221

Why is the amount of interest earned in part a less than half of the amount of the interest earned in part b?
1221 45%, same interest rate for half of the years. You get interests on the interests earned in the first five
years.

You are thinking of retiring. Your retirement plan will pay 250.000 immediately on retirement or 350.000 in
five years after the date of your retirement. Which alternative shold I take?

0% 2

8% = 250.000*1.08 367.332

20% 622.080

Puoi sia capitalizzare che attualizzare, è la stessa cosa.

The British gov. Has a consol bond outstanding paying of 100 per year forever. Assume the current interest
rate is 4% per year.
What is the value of the bond immediately after the payment is made?

What is the value of the bond immediately before the payment is made?

POSTICIPATA 100/0.04= 2500 FIRST PAYMNT IS AT PERIOD 1

ANTICIPATA, 2600

what is the present value of 1000 paid at the end of each of the next 100 years if the interest rate is 7% per
year?

= 100/0.07*( 1-1/1.07ALLA100) 14.269,25

THE PV OF 1000 TO BE PAID EVERY YEAR FOR 100 YEARS DISCOUNT TO THE PRESENT AT 7% IS 14.269,25