FNCE Winter Final Exam (30 marks, 30% in the total evaluation) Name: Student ID: The assignment is a 24-hour test. It will be available on Mar 26 and due Mar27 midnight Submit in a single Word/PDF or Excel File Question 1: Stock market Rate and Return . (2 marks each, total 18 marks) Instructions: 1) You must complete the assignment individually. Any collusion will lead to a zero mark and will be reported to the academic office. 2) The data source and reference must be in APA format. 3) All the sub questions (expect part 1) must include definition, calculation and comments.

For example, the pros and cons of a method, critics of a model or a theory. You must write in complete sentences and paragraphs, minimum 2 paragraphs for each sub-question. Assume that you recently graduated with an MBA degree and have just landed a job as a financial planner with Henry’s Investment Inc. Your first assignment is to create a portfolio for a client by selecting two stocks on the market. 1.

You need to complete the below table by selecting ANY two stocks (except for Microsoft) on Nasdaq and collect the data on Dec 31 each year (or the last trading day in that year): Company 1’s Name Company 2’s Name Nasdaq Composite Includes Dividends Year Stock Price Dividend (paid in the last quarter as of the year) Stock Price Dividend (paid in the last quarter as of the year) . Use the data you have collected to calculate annual returns for Company 1, Company 2, and the Market Index, and then calculate average returns over the five-year period. Give comments on your calculation results. Which stock has a higher return? 3.

Calculate the standard deviation of the returns for Company 1, Company 2, and the Market Index. Do you think the standard deviation can reflect the stocks’ risks? And why? 4. Construct a scatter diagram graph that shows Company 1’s and Company 2’s returns on the vertical axis and the Market Index’s returns on the horizontal axis.

What’s the relationship between the two stocks from your observation? 5. Estimate or use data to find Company 1’s and Company 2’s betas, as the slopes of regression lines with stock returns on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). Are these betas consistent with your graph? Do you think beta can reflect the stocks’ risks?

And why? 6. You need to determine the risk-free rate. What will be your approach and why do you select this method? How much the rate will be?

7. What’s the market risk premium? Assume that the market risk premium is 5.5%. What is the expected return on the market? Use the SML equation to calculate the two companies' required returns.

8. If you formed a portfolio that consisted of 50% Company 1 stock and 50% Company 2 stock, what would be its beta and its required return? How will the portfolio hedge the risk? 9. Suppose an investor wants to include any one of the two stocks that you recommended in his or her portfolio.

Stocks A, B, and C are currently in the portfolio, and their betas are 0.869, 1.985, and 1.02, respectively. Recommend a stock from the two stocks you’ve selected to her/him and calculate the new portfolio’s required return if it consists of 25% of the company you’ve recommended, 15% of Stock A, 40% of Stock B, and 20% of Stock C. Give your comments to risk of the new portfolio. Do you recommend it or not? And why?

Question 2: WACC Estimation (the questions was referenced and revised from Financial Management textbook of Nelson Publishing) The balance sheet for Aurora Equipment Implements Inc is provided below along with other selected financial data. Balance Sheet as at December 31, 2020 ($ millions) Cash Accounts payable Accounts Receivable 20 Accruals 10 Inventory 20 Short term debt 5 Total current assets 50 Total current liabilities 25 Long-term debt 20 Plant and equipment (net) 38 Preferred stock 3 Common equity 10 Retained earnings 30 Total Assets Total liabilities and equity The facts given: 1. Short term debt consists of bank loans that currently cost 10%, with interest payable quarterly.

These loans are used to finance receivables and inventories in a seasonal basis, so in the off-season, bank loans are zero. 2. The long term debts consist of 20-years, semi-annual payment mortgage bond with a coupon rate of 8%. Currently these bonds provide a yield to investors of rd=7%. Of new bonds were sold, they would yield investors 7%.

3. The firms’ perpetual preferred stock has a par value, pays a quat4rly dividend of

Fnce623 2021 Winter Final Exam 30 Marks 30 In The Total Evaluation

FNCE Winter Final Exam (30 marks, 30% in the total evaluation) Name: Student ID: The assignment is a 24-hour test. It will be available on Mar 26 and due Mar27 midnight Submit in a single Word/PDF or Excel File Question 1: Stock market Rate and Return . (2 marks each, total 18 marks) Instructions: 1) You must complete the assignment individually. Any collusion will lead to a zero mark and will be reported to the academic office. 2) The data source and reference must be in APA format. 3) All the sub questions (expect part 1) must include definition, calculation and comments.

For example, the pros and cons of a method, critics of a model or a theory. You must write in complete sentences and paragraphs, minimum 2 paragraphs for each sub-question. Assume that you recently graduated with an MBA degree and have just landed a job as a financial planner with Henry’s Investment Inc. Your first assignment is to create a portfolio for a client by selecting two stocks on the market. 1.

You need to complete the below table by selecting ANY two stocks (except for Microsoft) on Nasdaq and collect the data on Dec 31 each year (or the last trading day in that year): Company 1’s Name Company 2’s Name Nasdaq Composite Includes Dividends Year Stock Price Dividend (paid in the last quarter as of the year) Stock Price Dividend (paid in the last quarter as of the year) . Use the data you have collected to calculate annual returns for Company 1, Company 2, and the Market Index, and then calculate average returns over the five-year period. Give comments on your calculation results. Which stock has a higher return? 3.

Calculate the standard deviation of the returns for Company 1, Company 2, and the Market Index. Do you think the standard deviation can reflect the stocks’ risks? And why? 4. Construct a scatter diagram graph that shows Company 1’s and Company 2’s returns on the vertical axis and the Market Index’s returns on the horizontal axis.

What’s the relationship between the two stocks from your observation? 5. Estimate or use data to find Company 1’s and Company 2’s betas, as the slopes of regression lines with stock returns on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). Are these betas consistent with your graph? Do you think beta can reflect the stocks’ risks?

And why? 6. You need to determine the risk-free rate. What will be your approach and why do you select this method? How much the rate will be?

7. What’s the market risk premium? Assume that the market risk premium is 5.5%. What is the expected return on the market? Use the SML equation to calculate the two companies' required returns.

8. If you formed a portfolio that consisted of 50% Company 1 stock and 50% Company 2 stock, what would be its beta and its required return? How will the portfolio hedge the risk? 9. Suppose an investor wants to include any one of the two stocks that you recommended in his or her portfolio.

Stocks A, B, and C are currently in the portfolio, and their betas are 0.869, 1.985, and 1.02, respectively. Recommend a stock from the two stocks you’ve selected to her/him and calculate the new portfolio’s required return if it consists of 25% of the company you’ve recommended, 15% of Stock A, 40% of Stock B, and 20% of Stock C. Give your comments to risk of the new portfolio. Do you recommend it or not? And why?

Question 2: WACC Estimation (the questions was referenced and revised from Financial Management textbook of Nelson Publishing) The balance sheet for Aurora Equipment Implements Inc is provided below along with other selected financial data. Balance Sheet as at December 31, 2020 ($ millions) Cash $10 Accounts payable $10 Accounts Receivable 20 Accruals 10 Inventory 20 Short term debt 5 Total current assets 50 Total current liabilities 25 Long-term debt 20 Plant and equipment (net) 38 Preferred stock 3 Common equity 10 Retained earnings 30 Total Assets $88 Total liabilities and equity $88 The facts given: 1. Short term debt consists of bank loans that currently cost 10%, with interest payable quarterly.

These loans are used to finance receivables and inventories in a seasonal basis, so in the off-season, bank loans are zero. 2. The long term debts consist of 20-years, semi-annual payment mortgage bond with a coupon rate of 8%. Currently these bonds provide a yield to investors of rd=7%. Of new bonds were sold, they would yield investors 7%.

3. The firms’ perpetual preferred stock has a $25 par value, pays a quat4rly dividend of $0.45, and has a yield to investors of 6.5%. New perpetual preferred would have to provide the dame yield to investors and the company would incur a 5% flotation cost to sell them. 4. The company has 4 million shares of common stock outstanding.

P0=$20, but the stock has recently traded in the range od $17 to $23. D0=$1 and EPS0=$2. ROE based om average equity was 24% in 2015, but management expects to increase this return on equity to 30%; however security analysists are nor aware of management’s optimism in this regards. 5. Betas, as reported by security analyst, range from 1.7 to 1.7; the government bond rate is 5%.

Brokerage house reports forecast growth rate in the range of 4% to 8% over the forecastable future. However, some analysis does not explicitly forecast growth rates, but they indicate to their clients that they expect Aurora’s historical trends. As shown in the table in fact (9), to continue. 6. At a recent conferences, Aurora’s financial vice president polled some pension fund investment managers on the minimum rate of return they would have to expect pm Aurora’s common to make them willing to buy the common rather than Aurora bonds, when the bonds yield 7%.

The responses suggested a risk premium over Aurora bonds of 3 to 5 percentage points. 7. Aurora in in the 30% tax bracket. 8. Aurora principal investment banker, J&J Company predicts a decline in interest rats, with rd falling to 6% and the government bond rate to 4%, although J&J acknowledge that an increase in the expected inflation rare could lead to an increase rather than a decrease in rates.

9. Here is the historical record of EPS and DPS. Year EPS DPS Year EPS DPS 2006 $0.09 $0. $0.78 $0...........................00 Assume that you are a recently hired financial analysist and that your boss, the treasurer, has asked you to estimate the company’s WACC. Assume no new equity will be issues. Your cost of capital should be appropriate for use in evaluating projects that are in the same risk class as the firm’s average assets now on the books.

Write a report including the overall WACC calculation ( 4marks) , the rational of WACC different (2 marks), approaches in estimating equity costs different (2 marks), the common mistakes people make when estimating WACC , the pros and cons (2 marks),, and give your comments on Aurora’s capital structure(2 marks). The data source and reference must be in APA format. 1 Appendix : Synthesis and Recommendations EBP QUESTION: Category (Level Type) * Total Number of Sources Overall Quality Rating Synthesis of Findings Evidence That Answers the EBP Question Level I · Experimental study · Randomized control trial · Systematic review of RCTs with/without meta-analysis Level II · Quasi-experimental study · Systematic review of combination of RCTs and quasi-experimental, or non-experimental with/without meta-analysis Level III · Non-experimental study · Systematic review of combined RCTs, quasi-experimental, and non-experimental studies only, with/without meta-analysis · Qualitative study or systematic review of qualitative studies with/without meta-synthesis Level IV · Opinion of respected authorities and/or reports of nationally recognized expert committees/ consensus panels based on scientific evidence Level V · Evidence obtained from literature reviews, quality improvement, program evaluation, financial evaluation, or case reports · Opinion of nationally recognized experts based on experiential evidence Recommendations Based on Evidence Synthesis and Selected Translation Pathway 4 Appendix A : Individual Evidence Summary EBP QUESTION: In males with urinary inconsistencies, dementia, an overactive bladder, or even those going through alcohol withdrawal, what is the effect of condom catheterization as compared to the use of Foley catheterization on the prevention of CAUTIs a condition referred to as Catheter-Associated Urinary Tract Infections (CAUTIs)?

Article # Author & Date Evidence Type Sample, Sample Size, & Setting Study findings that help answer the EBP question Limitations Evidence Level & Quality 1 Agrawal, M., Gite, V. A., & Sankapal, P. (2020) Case Study · 2 case studies that presented to the emergency department Evidence of the importance of proper care and maintenance of condom catheters. No recommendations to improve Level V Quality B 2 Jabbour, Y., Abdoulazizi, B., Karmouni, T., El Khader, K., Koutani, A., & Iben Attya Andaloussi, A. (2018). Pilot Study · 1 case that presented to the emergency department The importance of catheter management and potential complication of poor maintenance of a condom catheter. Small sample size Level V- High Quality 3 Li, F., Song, M., Xu, L., Deng, B., Zhu, S., & Li, X. (2019) Meta-analysis · 23,738 patients and 25 hospitals The cause of urinary tract infection in relation to prolong use of catheters in bedridden patients.

Too broad of sample size Level V Quality B 4 Majumder, M. M. I., Ahmed, T., Ahmed, S., & Khan, A. R. (2018) Mix method study · No individual studies The rational and un rational use of the catheter use and what ultimately leads to infection development. No sample sizes.

No individual studies. Level V Quality B 5 Hariati, H., Suza, D. E., & Tarigan, R. (2019) A Pilot Study · 82 Patients treated in the General Hospital of Medan Provides analysis of the risk factors activating CAUTI Small sample size, lack of completed data & terminology Level IV Quality A 6 Majumder, I., Ahmed, T., Ahmed, S. (2018) Pilot Study · 100 patients with indwelling catheters at Dhiraj General Hospital This study discovered the most known pathogens (E. coli and Klebsiella) to be created by CAUTI’s. Reliability dependent on author’s interpretation of primary literature Level III Quality B 7 Gnade, C., Storm, D., & Ten Eyck, P. (2017) Qualitative Interview Study · 150 patients undergoing major urologic oncology surgery It encourages the use of alternative methods other than catheterization Initial sample group not clear, Individual organization Level III Quality B 8 Gnade, C., Wu, C., Ten Eyck, P., Leder, L., & Storm, D. (2020) Quantitative research study · Inpatient CAUTI database.

No sample study Measures the catheter utilization and CAUTI rate using binomial scattering and compares the result No sample study Level III Quality A 9 Advani, S. D., & Fakih, M. G. (2019) Literature Review · No sample study. Healthcare associated urinary tract infections It suggests that the chances of CAUTI to develop into secondary complications is very minimal. No sample group Level V Quality B 10 Dehghanrad, F., Gholamzadeh, S., Ghorbani, M., Nobakht-e-Ghalati, Z., Rosenthal, V., Zand, F. (2019) Quasi-experimental study · 330 patients in the hospital setting It advices the use of standardize device utilization ratio which provides a good surrogate that inhibits damages associated with catheter.

No recommendation for improvement Level IIIHigh Quality A Be sure to include the sample (population of interest), sample size (# of participants), setting (location of the participants) References Advani, S. D., & Fakih, M. G. (2019). The evolution of catheter-associated urinary tract infection (CAUTI): is it time for more inclusive metrics? Infection Control & Hospital Epidemiology , 40 (6), .

Agrawal, M., Gite, V. A., & Sankapal, P. (2020). Penile gangrene: A rare but disastrous complication of the improper application of condom catheters. Journal of Clinical Urology , . Dehghanrad, F., Nobakht-e-Ghalati, Z., Zand, F., Gholamzadeh, S., Ghorbani, M., & Rosenthal, V. (2019).

Effect of instruction and implementation of a preventive urinary tract infection bundle on the incidence of catheter associated urinary tract infection in intensive care unit patients. Electronic Journal of General Medicine, 16(2), 1–9. Jabbour, Y., Abdoulazizi, B., Karmouni, T., El Khader, K., Koutani, A., & Iben Attya Andaloussi, A. (2018). Penile gangrene and necrosis leading to death secondary to strangulation by condom catheter. Case reports in urology , 2018 .

Li, F., Song, M., Xu, L., Deng, B., Zhu, S., & Li, X. (2019). Risk factors for catheterâ€associated urinary tract infection among hospitalized patients: A systematic review and metaâ€analysis of observational studies. Journal of advanced nursing , 75 (3), . Majumder, M. M.

I., Ahmed, T., Ahmed, S., & Khan, A. R. (2018). Microbiology of catheter associated urinary tract infection (p. 31). IntechOpen.

Hariati, H., Suza, D. E., & Tarigan, R. (2019). Risk Factors Analysis for Catheter-Associated Urinary Tract Infection in Medan, Indonesia. Open access Macedonian journal of medical sciences , 7 (19), 3189. Gnade, C., Storm, D., & Ten Eyck, P. (2017).

MP92-02 BPA alert effect on CAUTI hospital-wide at UIHC. The Journal of Urology , 197 (4S), e1226-e1226. Gnade, C., Wu, C., Ten Eyck, P., Leder, L., & Storm, D. (2020). The Influence of an Electronic Medical Record Embedded Best Practice Alert on Rate of Hospital Acquired Catheter Associated Urinary Tract Infections: Do Best Practice Alerts Reduce CAUTIs? Urology , 141 , 71-76.

Md. Mahabubul Islam Majumder, Tarek Ahmed, Saleh Ahmed and Ashiqur Rahman Khan (November 5th 2018). Microbiology of Catheter Associated Urinary Tract Infection, Microbiology of Urinary Tract Infections - Microbial Agents and Predisposing Factors, Payam Behzadi, IntechOpen, DOI: 10.5772/intechopen.80080. Available from: