What determine the Structure of Interest Rates and name the three primary shapes of the Structure of Interest Rates?

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Week 7: Interactive activity

7.1 Learning Outcomes:

  • Understanding the structure of interest rate.
  • Explaining the main factors that affect the structure of interest rate and how do they influence its’ shape.

7.2 Action Required:

Read the article in the following links:

https://www.investopedia.com/terms/t/termstructure.asp

7.3 Test your Knowledge (Question):

What determine the Structure of Interest Rates and name the three primary shapes of the Structure of Interest Rates?

7.4 Instructions

Answer the given question in Discussion Board.

Week 8: Interactive activity

8.1 Learning Outcomes:

  • Identify the different types of firm stock.

8.2 Action Required:

Kindly go through the article in the following link:

Understanding Preferred Stock vs. Common Stock (investopedia.com)

 

8.3 Test your Knowledge (Question):

What Is the Difference Between Preferred Stock and Common Stock?

 

8.4 Instructions

Answer the given question in Discussion Board.

In the light of evidence that more than 50% of M&A fail to create value for acquiring firms’ shareholders, discuss the role of firm and deal characteristics that have been shown to determine the likelihood of value creation.

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Mergers valuation finance

Question 1)

In the light of evidence that more than 50% of M&A fail to create value for acquiring firms’ shareholders, discuss the role of firm and deal characteristics that have been shown to determine the likelihood of value creation. [Max of 1000 words]

Question 2)

Answer both parts of this question:

  • a. Discuss some country factors that analysts must consider when evaluating cross-border acquisitions (CBA). [Max of 500 words]
  • b. What are the critical success factors in CBA?[Maxof500words]

Assuming a 21% marginal tax rate, and a 7% WACC, calculate the NPV of this investment. Do you recommend this project? Why?

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Exercise

The Forest Green Company is considering purchasing additional equipment that would have an initial cost of $400,000. They estimate it would add $220,000 to pre-tax revenues and variable operating expense (before taking account of depreciation) per year of 40%, for the first 4 years. In Year 5, they will cease production, and therefore will have no additional revenues or ongoing operating costs, but will incur special shutdown costs of $42,000 (aside from depreciation).

The packaging machine will be depreciated on a straight-line basis, over 5 years, and will have no salvage value (ignore the MACRS depreciation methodology for this problem.)

Assuming a 21% marginal tax rate, and a 7% WACC, calculate the NPV of this investment.  Do you recommend this project? Why?

Calculate the total operating expenses for Amazon, Walmart, and Target for 2022 and 2021.

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Total operating expenses

Use Excel. Calculate the total operating expenses for Amazon, Walmart, and Target for 2022 and 2021.

Who was Arthur Andersen, and what was the company’s role in the accounting industry? What were the factors that led to the scandal that ultimately brought down Arthur Andersen?

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Applied Finance Investment

As we agreed in class, you are required to complete this assignment on the Arthur Andersen scandal. In this assignment, you should answer the following questions in a detailed and comprehensive manner:

  1. Who was Arthur Andersen, and what was the company’s role in the accounting industry?
  2. What were the factors that led to the scandal that ultimately brought down Arthur Andersen?
  3. Describe the events that led up to the scandal, including the Enron case and the subsequent investigation.
  4. What was the role of Arthur Andersen in the Enron case, and how did the company’s actions contribute to the scandal?
  5. What were the consequences of the scandal for Arthur Andersen and its employees?
  6. What lessons can be learned from the Arthur Andersen scandal?

Your assignment should be supported by credible sources and formatted in a professional manner.

 

Based on your analysis, should the company open the mine? Most spreadsheets do not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project.

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BULLOCK GOLD MINING

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine.

Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $745 million today, and it will have a cash outflow of $55 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table. Bullock Mining has a required return of 12 percent on all of its gold mines.

    Year                 Cash Flow

0                —$745,000,000

1                    127,000,000

2                   135,000,000

3                   145,000,000

4                   185,000,000

5                   225,000,000

6                    165,000,000

7                    155,000,000

8                    134,000,000

9               — 55,000,000

QUESTIONS

1. Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.

2. Based on your analysis, should the company open the mine?

3. Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project.

How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt-to-capital ratios presented in Case Exhibit 4? How much value could Hill Country create for its shareholders at each of each of the three alternative debt levels?

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AF 495 CASE 6 AND 7

 

CASE6

Instructions: Answer all questions below. Make sure to show your work. Your answers must be typed. (TOTAL = 100 POINTS)

Hill Country Snack Foods

1. How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt-to-capital ratios presented in Case Exhibit 4? How much value could Hill Country create for its shareholders at each of each of the three alternative debt levels?

2. What debt-to-capital structure would you recommend as optimal for Hill Country Snack Foods? What are the advantages of adding debt to the capital structure? How would issuing debt impact the company’s taxes and expected costs of financial distress? How would the financial markets react if the company increased its financial leverage?

3. How could Hill Country implement a more aggressive capital structure? What methods could be used to increase debt and decrease equity?

4. Considering Hill Country’s corporate culture, what arguments could you use to persuade CEO Keener or his successor to adopt and implement your recommendation?

 

CASE 7

CASE WRITE-UP 7

Instructions: Answer all questions below. Make sure to show your work. Your answers must be typed. (TOTAL = 100 POINTS)

Jones Electrical Distribution

1. How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?

2. Why does a business that has profit of $30,000 per year need a bank loan?

3. What drove an increase in Jones’s accounts receivable and inventory balances in 2005 and 2006?

4. Is Nelson Jones’s estimate that a $350,000 line of credit is sufficient for 2007 accurate?

5. When will Jones be able to repay the line of credit?

6. What could Jones do to reduce the size of the line of credit he needs?

7. What are the implications for Jones’ s lifestyle of accepting the new, larger line of credit?

How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt-to-capital ratios presented in Case Exhibit 4? How much value could Hill Country create for its shareholders at each of each of the three alternative debt levels?

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Accounting & Finance Department AF495

Financial Policy CASE WRITE-UP 6

Instructions: Answer all questions below. Make sure to show your work. Your answers must be typed. (TOTAL = 100 POINTS)

Hill Country Snack Foods

1. How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt-to-capital ratios presented in Case Exhibit 4? How much value could Hill Country create for its shareholders at each of each of the three alternative debt levels?

2. What debt-to-capital structure would you recommend as optimal for Hill Country Snack Foods? What are the advantages of adding debt to the capital structure? How would issuing debt impact the company’s taxes and expected costs of financial distress? How would the financial markets react if the company increased its financial leverage?

3. How could Hill Country implement a more aggressive capital structure? What methods could be used to increase debt and decrease equity?

4. Considering Hill Country’s corporate culture, what arguments could you use to persuade CEO Keener or his successor to adopt and implement your recommendation?

Discuss the importance and structure of Financial Market in around (100 – 120) words?

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DISCUSSION

Discuss the importance and structure of Financial Market in around (100 – 120) words?

Get the inflation report of Saudi Arabia for Q3 of 2021 and Q3 of 2022 from the SAMA website and compare the changes. Discuss the Insurance Licensing Guidelines and Minimum Criteria published by SAMA.

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FIN-401: Banks management

Assignment Questions

  1. Explain the following banking laws in the context of Saudi Arabia.
    • Banking Control Law [2 Marks]
    • Anti-Money Laundering Law [2 Marks]
  1. Explain the following Finance laws in the context of Saudi Arabia.
    • Regulation of the Finance Companies [2 Marks]
    • Regulation of the Real Estate Finance Law [2 Marks]
  1. Get the inflation report of Saudi Arabia for Q3 of 2021 and Q3 of 2022 from the SAMA website and compare the changes. [2 Marks]

https://www.sama.gov.sa/en-US/EconomicReports/Pages/InflationReport.aspx

  1. Choose a Bank of your choice and do the following
    • Provide the list of its all lending programs. [1 Mark]
    • Discuss any two lending programs in detail [2 Marks]
  1. Discuss the Insurance Licensing Guidelines and Minimum Criteria published by SAMA. [2 Marks]