Multiple Regression Analysis
y = b0 + b1x1 + b2x2 + . . . bkxk + u
2. Inference
1
Multiple Linear Restrictions
Everything weve done so far has involved
testing a single linear restriction, (e.g. b1 = 0
or b1 = b2 )
However, we may want to jointly test
mul
Assignment
Please follow the instructions:
i)
ii)
iii)
iv)
For writing equation, use the InsertEquations (in MS word).
Interpretation has to be brief. Avoid writing irrelevant briefs.
Only answers to the questions should be given. This means you should no
Chapter 18: Dividends and Other Payouts
18.1 February 16: Declaration date - the board of directors declares a dividend payment that will be made on March 14. February 24: Ex-dividend date - the shares trade ex dividend on and after this date. Sellers bef
Chapter 17: Valuation and Capital Budgeting for the Levered Firm
17.1 a. The maximum price that Hertz should be willing to pay for the fleet of cars with all-equity funding is the price that makes the NPV of the transaction equal to zero. NPV = -Purchase
Appendix: 16B: The Miller Model and the Graduated Income Tax
16.17 a. According to the Miller Model, in equilibrium: rB (1 TC) = rS where rB = the pre-tax cost of debt (the interest rate) TC = the corporate tax rate rS = the required return on a firm's eq
Chapter 16: Capital Structure: Limits to the Use of Debt
16.1 a. The value of a firms equity is the discounted expected cash flow to the firms stockholders. If there is a boom, Good Time will generate cash flow of $250 million. Since Good Time owes its bo
Chapter 15: Capital Structure: Basic Concepts
15.1 a. Since Alpha Corporation is an all-equity firm, its value is equal to the market value of its outstanding shares. Alpha has 5,000 shares of common stock outstanding, worth $20 per share. Therefore, the
Chapter 14: Long-Term Financing: An Introduction
14.1 a. Since the "common stock" entry in the balance sheet represents the total par value of the stock, simply divide that by the par per share: Common Stock $135,430 = = 67,715 shares Par Value $2 b. Capi
Chapter 13:
13.1 a. b.
Corporate-Financing Decisions and Efficient Capital Markets
Firms should accept financing proposals with positive net present values (NPVs). Firms can create valuable financing opportunities in three ways: Fool investors. A firm can
Minicase: ALLIED products narrative
We have made a number of necessary assumptions. The instructor may decide to make different assumptions.
1. The average beta of companies in the commercial aircaraft market (Allied Signal, Boeing, etc) is one according
Chapter 12: Risk, Cost of Capital, and Capital Budgeting
12.1 The discount rate for the project is equal to the expected return for the security, RS, since the project has the same risk as the firm as a whole. Apply the CAPM to express the firms required
Chapter 11: An Alternative View of Risk and Return: The Arbitrage Pricing Theory
11.1 Real GNP was higher than anticipated. Since returns are positively related to the level of GNP, returns should rise based on this factor. Inflation was exactly the amoun
Chapter 10: Return and Risk: The Capital-Asset-Pricing Model (CAPM)
10.1 a. Expected Return = (0.1)(-0.045) + (.2)(0.044) + (0.5)(0.12) + (0.2)(0.207) = 0.1057 = 10.57% The expected return on Q-marts stock is 10.57%.
b.
Variance ( 2) = (0.1)(-0.045 0.1057
Chapter 9: Capital Market Theory: An Overview
9.1 a. The capital gain is the appreciation of the stock price. Because the stock price increased from $37 per share to $38 per share, you earned a capital gain of $1 per share (=$38 - $37). Capital Gain = (Pt
Chapter 8: Risk Analysis, Real Options, and Capital Budgeting
8.1 Calculate the NPV of the expected payoff for the option of going directly to market. NPV(Go Directly) = CSuccess (Prob. of Success) + CFailure (Prob. of Failure) = $20,000,000 (0.50) + $5,0
Chapter 7: Net Present Value and Capital Budgeting
7.1 a. Yes, the reduction in the sales of the companys other products, referred to as erosion, should be treated as an incremental cash flow. These lost sales are included because they are a cost (a reven
Appendix 5A: The Term Structure of Interest Rates, Spot Rates, and Yields to Maturity
5A.1 a. The present value of any coupon bond is the present value of its coupon payments and face value. Match each cash flow with the appropriate spot rate. For the cas
Chapter 5: How to Value Bonds and Stocks
5.1 The present value of any pure discount bond is its face value discounted back to the present. a. PV = F / (1+r)10 = $1,000 / (1.05)10 = $613.91 = $1,000 / (1.10)10 = $385.54 = $1,000 / (1.15)10 = $247.19
b. c.
Chapter 4: Net Present Value
4.1 a. b. c. Future Value Future Value Future Value = C0 (1+r)T = $1,000 (1.05)10 = $1,628.89 = $1,000 (1.07)10 = $1,967.15 = $1,000 (1.05)20 = $2,653.30
d.
Because interest compounds on interest already earned, the interest e
Chapter 3: Financial Planning and Growth
3.1 From the relationship, S = .00001 x GNP, we can get forecast sales: S = 0.00001; GNP = 0.00001 ($2,050 trillion) = $20,500,000
Now, compute the other values: Projected Current Assets = Current Assets + Current
Chapter 2: Accounting Statements and Cash Flow
2.1 Following the example in Table 2.1: Assets Current assets Cash Accounts receivable Total current assets Fixed assets Machinery Patents Total fixed assets Total assets Liabilities and equity Current liabil
1
MECHANICSOFOPTIONS
MARKETS
Options, Futures, and Other Derivatives, 7th Ed., John C. Hull (2008):
Chapter 9-10
PayoffsfromOptions
WhatistheOptionPositioninEachCase?
2
K=Strikeprice,ST=Priceofassetatmaturity
Payoff
K
longcall
Payoff
K
longput
Payoff
1
MECHANICSOFOPTIONS
MARKETS
Options, Futures, and Other Derivatives, 7th Ed., John C. Hull (2008):
Chapter 9-10
Notation
2
c : Europeancall
optionprice
p: Europeanput
optionprice
S0 : Stockpricetoday
AmericanCalloption
price
P : AmericanPutoption
price
S
1
MECHANICSOFOPTIONS
MARKETS
Options, Futures, and Other Derivatives, 7th Ed., John C. Hull (2008):
Chapter 9-10
Options
2
Acalloptionisanoptiontobuyacertainassetbya
certaindateforacertainprice(thestrikeprice)
Aputoptionisanoptiontosellacertainassetbya
ce