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rates of return

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Calculating rates of return The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008 the index was approximately 871. If the average divided paid on the stocks in the index is approximately 3.5 percent of the value of the index at the beginning of the year , what id the rate of return on the S&P index 

The rate of return on the S&P 500 is ? percent round to two decimals

What is your assessment of the relative riskiness of investing in a single stock such as Google, compared to investing in the S&P index?

a. In general , investing in the S&P index is riskier than investing in a single stock.

b. In general investing in a single stock has the same relative riskiness as investing in the S&P index

c.. There is not enough information given to answer this question

d. In general investing in a single stock is riskier than investing in the S&P index

 
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profit planning

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Provide at least one good (or bad) example of profit planning done by a firm you are familiar with, for example, a current or former employer. How would you determine if the firm’s information (provided in different formats by both the firm and other organizations) seems to be reasonable in their financial statements?

 
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Ebit-EPS

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Ebit-EPS break even analysis Home  Depot INc had 1,70 billion shares of common stock outstanding in 2008, whereas Lowes Companies Inc LOW had 1.46 billion shares outstanding. Assuming Home Depots 2008 interest expense is $696 million , Lowes interest expense is 239 million and a 35 percent tax rate for both firms what is their break-even level of operating income the level of ebit where is the same for both firms

The EBIT indifference is

 
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EBIT-EPS ANALYSIS

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EBIT-EPS ANALYSIS  Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consists of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonio. To finance the new venture two plans have been proposed.

Plan a is an all common-equity structure in which 2.5 million would be raised by selling 86,000shares of common stock.

PLAN B WOULD INVOLVE issuing 1.1 million in long term bonds with an effective interest rate of 12.3 percent plus another 1.4 million would be raised by selling 43,000 shares of common stock. The debt funds raised under plan b have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firms capital structure.

Abe and his partners plan to use 38 percent tax rate in their analysis and they hired a consulting basis to do the followinf

a. Find the EBIT INDIFERENCE level associated with the two financing plans.

b. Prepare a pro forma income statement for the Ebit level solved for in part a that shows that EPS WILL BE THE SAME REGARDLESS WHETHER PLAN A OR B IS CHOSEN.

 
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