The risk-free rate, kRF, is 3.6 percent and the market risk premiu.docx

The risk-free rate, kRF, is 3.6 percent and the market risk
premium, (kM - kRF), is 5 percent. Assume that required
returns are based on the CAPM. Your $1 million portfolio
consists of $ 206 ,000 invested in a stock that has a beta of 1.3
and the remainder invested in a stock that has a beta of 0.5 .
What is the required return on this portfolio? Enter your answer
to the nearest .1%. Do not use the % sign in your answer, thus
12.1% is 12. 1 rather than 12.1 or .121.
Your Answer:
Question 2 options:
Answer
Question 3 (3.9 points)
Jenni Company has a total debt to total assets ratio of 45% and
a current ratio of 4.1. The firm's stock sells for $ 119.4 per
share. The total market value of the equity is $ 5.7 million. The
market-to-book ratio is 5.7 . What is the book value per share?
Show your answer to the nearest $.01. Do not use the $ symbol
in your answer, thus if your answer is $2.80 enter 2.80.
Your Answer:
Question 3 options:
Answer
Thompson Inc.'s latest EPS was $3.50, its book value per share
was $22.75, it had 215,000 shares outstanding, and its debt-to-
assets ratio was 46%. How much debt was outstanding?
Question 4 options:
$3,393,738
$3,572,356

$3,958,289
$4,166,620
You have just taken out a 10-year, $12,075 loan to purchase a
new car. This loan is to be repaid in 120 equal end-of-month
installments. If each of the monthly installments is $150, what
is the effective annual interest rate on this car loan?
Question 5 options:
6.5431%
7.8942%
8.544%
8.8871%
9.0438%
A fixed coupon bond with par value of $1,000 has a coupon of
8%, semiannually payable. The current annual nominal market
interest rate (i.e., yield to maturity) for this bond is 6%.
Therefore the bond is selling ……….. and the bond's current
yield is ………..
Question 6 options:
at a premium; greater than 8%
at par value; at 8%
at a premium; less than 8%

at a discount; greater than 8%
at a discount; less than 8%
2 years ago an investor purchased a 4% semi-annual
compounding coupon bond with a remaining maturity of 20
years at a price of (at that time) 90% of par. Today, i.e. two
years after the purchase, the investor realizes that the bond has
exactly the same price like it had two years ago (i.e. 90%).
Based on this information, which of the following answers is
correct:
Question 7 options:
The YTM of the 4% Bond today is the same like two years ago.
Overall, the profit for the investor from this investment over the
two years is Zero.
Over the remaining life of the bond, the value of the principal
exceeds the value of the coupons.
If the investor held the 4% coupon bond until maturity, the
overall return from this investment over the 18 years would be
100% minus 90%, i.e. 10%.
None of the above answers is correct.
Consider the following information and then calculate the
required rate of return for the Universal Investment Fund, which
holds 4 stocks. The market's required rate of return is 13.25%,
the risk-free rate is 7.00%, and the Fund's assets are as follows:
Stock
Investment

Beta
A
$ 200,000
1.50
B
$ 300,000
C
$ 500,000
1.25
D
$1,000,000
0.75
Question 8 options:
9.58%
10.09%
11.18%
11.77%
You have determined the profitability of a planned project by
finding the present value of all the cash flows from that project.
Which of the following would cause the project to look more
appealing in terms of the present value of those cash flows?
Question 9 options:
The discount rate decreases.
The cash flows are extended over a longer period of time, but
the total amount of the cash flows remains the same.
The discount rate increases.

Answers b and c above.
Answers a and b above.
The CFO of Murray Brothers has suggested that the company
should issue $300 million worth of common stock and use the
proceeds to reduce some of the companys outstanding debt.
Assume that the company adopts this policy, and that total
assets and operating income (EBIT) remain the same. The
companys tax rate will also remain the same. Which of the
following will occur:
Question 10 options:
The company's net income will increase.
The company's taxable income will fall.
The company will pay less in taxes.
The firm's sales will increase
All of the above are correct.
From a finance perspective, what is the primary goal of the
corporation?
Maximize the pay and compensation of employees and managers
of the firm.
Maximize the value of the stockholders because they are the
owners of the corporation.

Maximize the wealth of all stakeholders if the firm wants to
continue to exist.
Maximize the societal value to minimize governmental
interference.
None of the above.
On its 2012 balance sheet, Barngrover Books showed $510
million of retained earnings, and exactly that same amount was
shown the following year in 2013. Assuming that no earnings
restatements were issued, which of the following statements is
CORRECT?
Dividends could have been paid in 2013, but they would have
had to equal the earnings for the year.
If the company lost money in 2013, they must have paid
dividends
The company must have paid out half of its earnings as
dividends.
The company must have paid no dividends in 2013.
Which of the following statements is most correct?
Rising inflation makes the actual yield to maturity on a bond
greater than the quoted yield to maturity which is based on
market prices.
The yield to maturity for a coupon bond that sells at its par

value consists entirely of an interest yield; it has a zero
expected capital gains yield.
On an expected yield basis, the expected capital gains yield will
always be positive because an investor would not purchase a
bond with an expected capital loss.
The market value of a bond will always approach its par value
as its maturity date approaches. This holds true even if the firm
enters bankruptcy.
All of the statements above are false.
You just graduated, and you plan to work for 10 years and then
to leave for the Australian "Outback" bush country. You figure
you can save $1,000 a year for the first 5 years and $2,000 a
year for the next 5 years. These savings cash flows will start
one year from now. In addition, your family has just given you
a $5,000 graduation gift. If you put the gift now, and your
future savings when they start, into an account which pays 8
percent compounded annually, what will your financial "stake"
be when you leave for Australia 10 years from now?
$16,651
$31,148
$21,432
$20,000
$28,393

New York Services reported $ 10.9 million of retained earnings
on its December 31, 2007 balance sheet. In 2008, the company
lost money; its net income was -$500,000 (negative $500,000).
Despite the loss, the company still paid a $ 1.89 per share
dividend. The company's earnings per share for 2008 were -
$2.50 (negative $2.50). What was the level of retained earnings
on the company's December 31, 2008 balance sheet? Show your
answer to the nearest dollar, but do not use the $ or , signs in
your answer.
Your Answer:
Answer
If a firms debt-to-equity ratio is 3.7 , what is its total debt to
total asset ratio? Show your answer to the nearest .1%. If your
answer is 45.6%, enter your answer as 45.6 rather than 45.6% or
.456.
Your Answer:
Answer
You have developed the following data on three stocks: Stock A
has a standard deviation of .15 and a Beta of .79. Stock B has a
standard deviation of .25 and a Beta of .61. Stock C has a
standard deviation of .20 and a Beta of 1.29. If you are a risk
minimizer, you should choose Stock _____ if it is to be held in
isolation and Stock _____ if it is to be held as part of a well-
diversified portfolio.
A, A

A, B
B, B
C, A
C, B
Spotty Markets has a 6.75 percent coupon bond outstanding that
matures in 10.5 years. The bond pays interest semiannually.
What is the market price per bond if the face value is $1,000
and the yield to maturity is 7.2 percent?
$899.85
$1,007.52
$903.42
$899.80
$967.24
Question 19
I have a diversified portfolio consisting of a $10,000 investment
in each of 15 different common stocks (i.e., your total
investment is $150,000). The portfolio beta is equal to 1.2 . You
have decided to sell one of your stocks which has a beta equal
to 1.3 for $10,000. You plan to use the proceeds to purchase

another stock which has a beta equal to 0.8 . What will be the
beta of the new portfolio? Show your answer to 2 decimal
places.
Your Answer:
Answer
Question 20
I wish to buy a $220,000 house with a 20 year mortgage with a
4.8% nominal annual rate (=A.P.R.) Payments are monthly,
interest is monthly compounded, and you did not make a down
payment. Assume you make all payments on time, at the end of
the month. Answer the following questions.
a) How much is each monthly payment? [2 decimal places]
b) How much interest will you pay with (=in) your 75th
payment? [2 decimal places]
c) Now assume you have made payments such that you only owe
$150,000 on the mortgage. You decide to increase your
payments by $100 per month. How many payments will it take
to pay off your mortgage?
Show your inputs for possible partial credit.
Question 21 (20 points)
Match the numbers to the accounts on the below scrambled
income statement balance sheet. Numbers are to the right of the
account. Thus Gross Profit 2,313 means Gross Profit = $2313.
Gross Profit 2,313 ; Other Long Term Liabilities 181 ;
Stores and Distribution Expense 1,703 ; Cost of Goods Sold
1,430 ; Paid-In Capital 434 ; Retained Earnings 2,550 ; Total
Stockholder’s Equity 1,389 ; Income Before Taxes 99 ;
Accounts Payable 141 ; Accrued Expenses 282 ; Net Income 52

; Marketing, General and Administrative Expense
458 ; Change in Retained Earnings 46 ; Cash and Equivalents
520 ; Receivables 52 ; Class A Common Stock 1 ; Deferred
Income Taxes (Current Asset) 16 ; Depreciation 30 ; Other
Current Assets 116 ; Total Current Assets 1,164 ; Property and
Equipment, net 968 ; Total Current Liabilities 487 ; Long-
Term Portion of Borrowings, Net 291 ; Operating Income 114 ;
Interest Expense, Net 15 ; Total Assets 2,505 ; Short-Term
Portion of Deferred Lease Credits (current liability) 35 ;
Leasehold Financing Obligations (Long Term Liability) 51 ;
Long-Term Portion of Deferred Lease Credits (Long Term
Liability) 106 ; Other Long Term Assets _________ ;
Restructuring Charges ________ ; Dividends _________ ; Total
Long Term Liabilities ________ ; Inventories ________ ; Net
Sales _________ ; Tax Expense_______ ; Short-Term Portion
of Borrowings, Net _________ ; Total Liabilities and
Stockholder’s Equity $ _________ ; Accumulated Other
Comprehensive Loss, net of tax (an Equity account) _________
Accumulated Other Comprehensive Loss, net of tax (an Equity
account)
Total Liabilities and Stockholder’s Equity
Other Long Term Assets

Inventories
Net Sales
Short-Term Portion of Borrowings, Net
Restructuring Charges
Total Long Term Liabilities
Tax Expense
Dividends
1.

373
2.
8
3.
6
4.
629
5.
460
6.
3743
7.
47
8.
29
9.
2505
10.
-1596
a.
Running head-business Analytics 1

Business Analytics
Name
Instructor
Date
Business Analytics
Business Analytics commonly abbreviated as (BA) is an
iterative and methodical research of an organization’s data. It
uses mostly statistical data analysis methods to give quality
results. Business Analytics is meant to help companies whose
decision-making process is data-driven. With large volumes of
data, an organization might make an uninformed decision that
could lead to the company making a loss or providing inferior
services (Seddon, Constantinidis, & Dod, 2012). Through the
utilization of Business Analytics, a company maximizes its
business operation through making informed business decisions.
This data may be their client base, their sales volumes, their
sales patterns, their rate of innovations and the products in the
market.
Every business is coordinated and made effective by the kind
of decision the company makes. A company aiming for success
must consider the current decision for they impact the
achievements of the future in terms of market placement,
employees’ retention and regulatory compliance. Data-driven
organizations are very sensitive to their data and treat it as a
cooperate asset and uses it to compete other companies.
According to Seddon, Constantinidis, & Dod (2012), Business
Analytics has four main roles in an organization that makes its

application useful to a company. These roles include; data
mining, predictive modeling and analysis, statistical analysis
and multivariate testing.
Data mining is the process of researching data to come up
with new relationships and patterns that can be used by an
organization to make better decisions. Shanks, & Bekmamedova
(2012) put is clear that Business Analytics provides
organizations with new trends and ways of analyzing data so as
to make good decisions. It also predicts future results of
applying the analytics through a process known as predictive
modeling and analysis. Business Analytics seeks to explain why
certain results occur to an organization through Statistical
analysis. Through understanding why certain results have
occurred a business organization can finger out which decision
to make. It also tests the decisions that the organization makes
to weigh their effectiveness. Through this testing process, an
organization gets a clear example of how to make effective
decisions.
According to Shanks, & Bekmamedova (2012), the process of
Business Analytics begins after the goal of the analytics is
defined. The goal is the purpose intended to be achieved at the
end of the Business Analytics. It might be hard to get an answer
to why certain results occurred. After determining the goal, a
methodology is selected upon which data is acquired to
reinforce the analysis. The analysis process is done against a
sample set of data which is usually small. In the analytics tools
used include applications with an ability to predict modeling
and spreadsheets that can handle statistical and complex data
mining. Business Analytics helps in making tactical decisions to
unforeseen events that might happen in the future. Some of
these decisions require real-time response hence the Business
Analytics is automated to handle such situations.
To expound on the importance of Business Analytics, IBM
Company and Toshiba Company will be used as sample
organizations. IBM Company is an American international
company that deals with machines manufacturing (computers).

It is also a multinational technology consulting firm with its
headquarters in Armonk, New York. Toshiba is also an
international company that deals with manufacturing of
computers. It is located in Tokyo, Japan. IBM Company has
been applying Business Analytics over a period of time which
has helped the company remain competitive and top in
Information Technology (IT) market (Shanks, & Bekmamedova,
2012).
To remain competitive in the IT field where many businesses
are growing at exponential rates the company has to increase its
information gathering and analysis process. Through Business
Analytics IBM Company has been able to build competitive
strengths in this interconnected and intelligent world. Through
the use of Business Analytics, IBM has been able to utilize the
readily available information on its target customer and market,
quality of employees, and manufacturing standards to its
advantage. The IMB Company has used Business Analytics to
improve its operations in serving their customers which has
been of great help to the company. The company is large and it
is believed to have massive data bank. It is through the
analytics that the company has been able to evaluate the data
and analyze it for past, present and planning. The correct
administration of their data has provided the insight to their
entrepreneurial growth. In addition, the use of analytics has
enabled the company to target print and online promotions that
have made it the most popular IT Company (Seddon,
Constantinidis, & Dod, 2012).
On the other hand, Toshiba has not been able to compete
effectively in the market. This problem is a result of not
knowing the exact number of products to produce. The decision
making has been a big problem since they deal with lump sum
amount of data which has not been properly managed to its
advantage (Shanks, & Bekmamedova, 2012). Also, the company
has not been able to predict future business trends that have led
to its slow growth.
The use of analytics has helped the IBM Company accomplish

its goals. It has achieved its goals because it is has been able to
improve its operations through effective decision making. To
capture more customers, the company has been able to use
analytics to focus on online promotions. Further promotions
depend on the past data that the analytics provide. It is with this
organized data that the company has been able to predict on its
future trends thus making an effective decision to promote their
products internationally. Also, it has made the company
competitive in the market since it is able to work on set
strategies on the number of products to produce and on which
line. Information retrieval has been easy due to the use of well-
developed databases and cloud computing (Shanks, &
Bekmamedova, 2012). Use of databases has improved its
operations in serving the customers since the information is
stored in a systematic manner for fast retrieval.
There are various challenges that face entrepreneurs today.
These challenges include cash flow management, strapped
budget, marketing strategy, making a choice on what to sell etc.
Business Analytics has made it easier for business and
entrepreneurs to solve these challenges. IBM Company had
faced several similar challenges before it resolved using
Business Analytics. The management was unable to estimate the
knowledge and SWOT Analysis of their product (Seddon,
Constantinidis, & Dod, 2012). The inability to estimate their
demand, led to a fluctuating production that affected their
customers’ needs. Also, the company was faced with a strapped
budget. This situation meant that the company’s budget was not
enough to suit its needs.
Cash flow management was another challenge to the company
since the company lacked proper cash flow records. To manage
the cash flow, the company recorded and analyzed their sales
pattern which led to increase in cash inflow into the company
and less cash out flow (Seddon, Constantinidis, & Dod, 2012).
Business Analytics is very useful to businesses and each
business should embrace it in order to improve its operations.
Most challenges facing businesses today can be solved through

business data analysis.
References
Seddon, P. B., Constantinidis, D., & Dod, H. (2012). How does
Business Analytics contribute to business value?.
Shanks, G., & Bekmamedova, N. (2012). Achieving benefits
with Business Analytics systems: An evolutionary process
perspective. Journal of Decision Systems, 21(3), 231-244.
Running head
-
business Analytics
1
Business Analytics
Name
Instructor
Date

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