Spectrometer Purchase Analysis: Investment & Cash Flow
Spectrometer Purchase Analysis
Let’s analyze the proposed purchase of a spectrometer for the R&D department. The base price is $140,000, with an additional $30,000 for modifications. The equipment falls into the MACRS 3-year class and will be sold after 3 years for $60,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment requires an $8,000 increase in net operating working capital (spare parts inventory). The project will save the firm $50,000 per year in before-tax
Read MoreMong Kok Ltd Financials: Translated Accounts Analysis
Mong Kok Ltd: Translated Accounts as at 30 June 2018
| HK$ | Exchange Rate | A$ | |
|---|---|---|---|
| Sales | 595,000 | 0.85 | 505,750 |
| Cost of Sales | 400,000 | 0.85 | 340,000 |
| 195,000 | 165,750 | ||
| Expenses | 100,000 | 0.85 | 85,000 |
| 95,000 | 80,750 | ||
| Tax Expense | 20,000 | 0.85 | 17,000 |
| Profit for the Period | 75,000 | 63,750 | |
| Retained Earnings (1/7/17) | 450,000 | 366,000 | |
| 525,000 | 429,750 | ||
| Dividend Paid | 25,000 | 0.80 | 20,000 |
| Retained Earnings (30/6/18) | 500,000 | 409,750 | |
| Share Capital | 200,000 | 0.80 | 160,000 |
| General Reserve | 100,000 | 0.80 | 80,000 |
| FCTR | (25,750) | ||
| 800,000 | 624,000 | ||
| Current Assets | 250,000 | 0.78 | 195,000 |
| Property, Plant & |
Stock Market Anomalies: Value, Size, and Momentum
Cross-Section Predictability of Stock Returns
Ideally, all securities should have equal expected risk-adjusted returns, eliminating any alpha (α). However, empirical studies have identified several cross-sectional anomalies, including the value premium, size effect, and momentum. These anomalies result in the formation of groups of stocks with different average returns.
Predictability of returns?
- Yes: Behavioral finance-based explanations.
- No: The asset-pricing model used is misspecified.
Investment
Read MoreUnderstanding Option Greeks: Delta, Gamma, Theta, Vega, Rho
What Can Greek Options Do for You?
Armed with Greeks, an options trader can make more informed decisions about which options to trade and when to trade them. Consider some of the things Greeks may help you do:
- Gauge the likelihood that an option you’re considering will expire in the money (Delta).
- Estimate how much the Delta will change when the stock price changes (Gamma).
- Get a feel for how much value your option might lose each day as it approaches expiration (Theta).
- Understand how sensitive an option
Dividend Policy Calculations and Share Repurchase Strategies
Share Repurchase Impact: How many outstanding shares will there be if DividendsActivity SA dedicates the same amount as dividends, with a 5% dividend yield, to repurchase shares in the Stock Exchange Market?
Formula: ((Common Stock / CS Price per Share)) – ((Payout % * Net Income) / Today’s Price per Share))
Payout for 3% Dividend Yield: Calculate the payout required to provide a dividend yield of 3%.
Formula: ((Div.Yield % * Today’s Price per Share * (Common Stock / CS Price per Share)) / Net Income)
Read MoreTrading, Investment Companies, and Derivatives: A Comprehensive Analysis
Lecture 16: Trading Mechanics and Costs
Trading Commissions: Discount brokerages profit from Payment for Order Flow (PFOF) and asset management products (explicit). PFOF: Customer to broker, broker sends to wholesaler who gets a fee, wholesaler provides best execution back to broker to customer.
Spread: Difference between bid (buy) and ask (sell) price (implicit).
- Investors sell at the bid and buy at the ask.
- Transaction cost for investors, source of profit for market makers (e.g., dealers).
Some trades
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