FINANCIAL MANAGEMENT AMF 3871 TEST 2 2020
Question 1 (10)
Janjies Corporation, an outsized heterogeneous manufacturer of craft
elements, is attempting to work out the initial investment needed to
interchange a recent machine with a brand new, additional refined model.
The machine’s buy cost is $380,000 and an extra $20,000 are going to be
necessary to put in it. It will be depreciated under MACRS employing a 5year recovery amount. The firm has found a purchaser willing to pay
$280,000 for the current machine and take away it at the consumer’s
expense. The firm expects that a $35,000 increase in current assets and an
$18,000 increase in current liabilities can accompany the replacement. Each
ordinary income and capital gains are taxed at 40%.
Question 2 (10)
Consider the subsequent info regarding two stocks wherever the likelihood
of an economic boom is 40%:
Economic
State
Return A (RA)
Return B (RB)
Boom
38%
6%
Recession
–4%
12%
a. Compute the expected return for stock A and stock B.
b. Compute the standard deviation of stock A and stock B.