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5.22: Over 2 years you would have either owned 16.6% or 16.4% because (1+6%)(1+10%)-1=16.6%or (1+3%)(1+13%)=16.4% .Over 5 years you would get   115.5% or 1078 for stock and and 113.6% or $1068 for stock B 5.24: The compounded geometric rate of return is 12.9%. The average arithmetic rate of return is 13.4%. The arithmetic average is always the preferred number because it is always the higher number 5.26: r5=10%(1+r0,5)(1+r5)^5=1.6105making the 5 year total return 61.05 5.28 a.) 85.03 b.)6.35%   1.0635^10=1.8503

5.22: Over 2 years you would have either owned 16.6% or 16.4% because (1+6%)(1+10%)-1=16.6%or (1+3%)(1+13%)=16.4% .Over 5 years you would get   115.5% or 1078 for stock and and 113.6% or $1068 for stock B 5.24: The compounded geometric rate of return is 12.9%. The average arithmetic rate of return is 13.4%. The arithmetic average is always the preferred number because it is always the higher number 5.26: r5=10%(1+r0,5)(1+r5)^5=1.6105making the 5 year total return 61.05 5.28 a.) 85.03 b.)6.35%   1.0635^10=1.8503

6.24;Higher expected rate of return generally comes with higher risk. 6.26: The expected payoff is $99. The discounted payoff is $99/(1+5%)=$94286 which is the promised 6.06% 6.28:yes in order for it to be a good investment the rate of return would have to be lower that 7% because Disney may go bankrupt 6.30: Moodys and Standard Porrs are the main rating agencies which are investment and speculative grades Investment grade defaults are less than 5% speculative are around 20%.

1.)     The difference between a market penetration strategy and a market development strategy is that a market penetration strategy targets current customers of the product or service while a market development strategy targets customers who either have been targeted by you or your competitors but simply have not been persuaded to buy; or they could be customers in segments that have not been pursued by you or the competitors in your product category. 2.)     A marketing plan is made up of objectives, customer targets, competitor targets, core strategies and the marketing mix. The objective is to decide what the goal is and how to get there

16.16 A cash flow right is the amount of cash you are supposed to receive as a function of the under-lying value of the firm. It is not an “enforcement” right. You usually need the latter to obtain the former. 16.20 APR can be a shorthand for “absolute priority rule.” It states that more senior securities are satisfied first, before more junior securities receive anything. It can also be an abbreviation for “annual percentage rate,” which appeared in Section 16.22 If the firm is worth less than 8,000 x $20,000 = $160,000,000, the bondholders will own the entire firm, and the shareholders will receive nothing. If the bondholders convert, there will be 800,000 + 1,200,000 = 2 million shares outstanding, and the bondholders will own 800,000/2,000,000 = 40% of the firm. Therefore, they will be interested in converting when 40% of the firm’s value exceeds $160,000,000. Because $160,000,000/0.4 = $400 million, the bondholders will be indifferent up to and including this point, but will...

15.28   Method of comparables would be a better technique. You would use the ratio with price as price as the numerator and square footage as the denominator 15.30 Earnings because cash flow fluctuates too much. This is because if there is a large increase in expenditure then there will be a large increase in cash flow later but this is not represented in one cash flow today.

14.18:   Income statement and cash flows are about flows and owners’ equity and balance sheets are about stocks 14.20: It would start at 3 million and depreciate at 75000 per year making the accounting value 2.925 million in the second year, 2.85 million in the third year until the 39 th year when it has an accounting value of 75000. During the next 11 years it will   be worth 0 14.22: a) Prepare the income statement and cash flow statements by year for 10 years. b) The economic value of this car is $336,811. c) You can infer the economic value of the car by discounting the after-tax cash flows by the correct cost of capital (r = 12%) each year: $69, 500/1.121 +$71, 300/1.122 +· · ·+$66, 500/1.1210 ≈ $336, 811. 14.24: The deferred tax increase by 129 million. The cash flow was not as large as 1367 instead it was 1238. The reoccurring 1367 is a coincidence.

13.2:   No because the internal rate of return is a multi-period generalization of its rate of return 13.22: You can’t know the expected payoff only its promised payoff 13.24 a.) 4%=3%*2=10%. Its current projects are b.) c.) d.) e.) f.) g.)