Altamimi Company’s net income for the year 2000, is $3,700,214. The company had an

Altamimi Company’s net income for the year 2000, is $3,700,214. The company had an EBITDA of $ 10,125,300, and its depreciation and amortization expense was equal to $2,543,790. The company's average tax rate is 35 percent.

1. What is the amount of interest expenses for the firm? (Show the details of your calculations).
2. Prepare a common sized Income Statement if sales equal $12,000,000.

Q2. (2 Marks)

The following are accounts balance (in thousands) for Malak Company. Prepare a balance sheet, and Income statement using intermediate steps t=35% for the year ended December 31, 2018.

Net property and equipment	$ 2,000
Accounts receivable	$3,000
Notes payable	$37,000
Revenues	$ 983,000
Supply expenses	$ 255,000
Depreciation expenses	$ 35,000
Labor expense	$300,000
Interest Expenses	$11,000
Stockholders’ Equity	$61,500
Cash & cash equivalents	$97,000
Long-term debt	$3,500

                              

Q3. Why secondary markets are so important to raise capital? (1 mark)

You purchased a stock six months ago for $50 and have since received two quarterly

You purchased a stock six months ago for $50 and have since received two quarterly dividend payments of $1 each.  The stock currently sells for $44.  What is your holding period return on this stock?

You have a saving account that you were told has an effective annual return of 12% and compounds daily.  What is the Annual Percentage Rate you on this account?

An investor purchased a bond for $1,000, received $11 in interest, and then sold the bond for $1,067 after holding it for seven months. What is the holding period return?

Keller Construction is considering two new investments. Project E calls for the purchase of

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project E					Project H
($23,000 Investment)					($25,000 Investment)
Year	Cash Flow				Year	Cash Flow
1	$	7,000			1	$	19,000
2		10,000			2		10,000
3		11,000			3		9,000
4		14,000

a. Determine the net present value of the projects based on a zero percent discount rate.

b. Determine the net present value of the projects based on a discount rate of 10 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)

c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 10 percent?

• Project E
• Project H
• Both H and E

Duration is defined as the weighted average time to maturity on an investment. What is the

Duration is defined as the weighted average time to maturity on an investment. What is the importance of duration on assets and liabilities? What role does duration play on bonds and risk? Provide your own real example outside the textbook and briefly discuss.

The Short-Line Railroad is considering a $110,000 investment in either of two companies

The Short-Line Railroad is considering a $110,000 investment in either of two companies. The cash flows are as follows:

Year	Electric Co.			Water Works
1	$	80,000		$	15,000
2		15,000			15,000
3		15,000			80,000
4 – 10		15,000			15,000

a. Compute the payback period for both companies. (Round your answers to 1 decimal place.)
  

b. Which of the investments is superior from the information provided?

You have just invested in a portfolio of three stocks. The amount of money that you invested

You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below.

Stock		Investment			Beta
A		$182,000			1.48
B		273,000			0.59
C		455,000			1.29

Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 16 percent and that the risk-free rate is 8 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.)

2. Following are the independent situations.

Carol recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent if the economy slips into a recession. Assume the probabilities of the healthy, soft, and recessionary states are 0.4, 0.3, and 0.3, respectively.

Calculate the coefficient of variation for the investment. (Round answer to 5 decimal places, e.g. 0.07680.)

Coefficient of variation

enter the coefficient of variation rounded to 5 decimal places

  

Ruth is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment.

Use the following table of returns and probabilities to determine the coefficient of variation for the investment. (Round answer to 5 decimal places, e.g. 0.07680.)

Probability

Return

Boom	0.2	25.00%
Good	0.1	15.00%
Level	0.1	10.00%
Slump	0.6	-5.00%

Coefficient of variation

enter the coefficient of variation rounded to 5 decimal places

Steven would like to invest in gold and is aware that the returns on such an investment can be quite volatile.

Use the following table of states, probabilities, and returns to determine the coefficient of variation for the investment. (Round answer to 5 decimal places, e.g. 0.07680.)

Probability

Return

Boom	0.1	37%
Good	0.2	19%
Ok	0.3	11%
Level	0.2	7%
Slump	0.2	-13%

Coefficient of variation

enter the coefficient of variation rounded to 5 decimal plac