What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation? Ultimately, what action would you recommend the company undertake? Why? 4. Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table for the light aircraft industry. 5. Mark and Todd agree that a ratio analysis can provide a measure of the compass performance. They have chosen Boeing as an aspirant company. Would you choose Boeing as an aspirant company? Why or why not? There are other aircraft manufacturers S&S Alarm could use as aspirant companies.
Discuss whether it Is appropriate to use any of the following companies: Bombardier, Embrace, Cirrus
Design Corporation, and Cessna Aircraft Company. 6. Compare the performance of S&S Air to the industry. For each ratio, comment on why It might be viewed as positive or negative relative to the industry. Suppose you create an Inventory ratio calculated as Inventory divided by current liabilities.
How do you think S&S Airs ratio would compare to the industry average? 1 . How does Ben’s age affect his decision to get an MBA? 2. What other, perhaps unquantifiable, factors affect Ben’s decision to get an MBA? Ben from a strictly financial standpoint? 4. Ben believes that the appropriate analysis is to calculate the future value of each option.
How would you evaluate this statement? 5. What initial salary would Ben need to receive to make him indifferent attending Hilton University and staying in his current position? 6. Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money.
The current borrowing rate is 5. 4 percent. How would this affect his decision? 1 . Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine. 2. Based on your analysis, should the company open the mine? 3.
Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a ABA script that calculates the payback period for a project. 1 . Go to finance. Yahoo. Com and download the ending monthly stock prices for American Standard (SAD) for the last 60 months. Also, be sure to download the dividend payments over this period as well. Next, download the ending value of the S&P 500 index over the same period. For the historical risk-free rate, go to the SST. Louis Federal Reserve Web site (www. Stultified. Org) and find the three-month Treasury bill secondary market rate. Download this file.
What are the monthly returns, average monthly returns, and standard deviation for American Standard stock, the three-month Treasury bill, and the S&P 500 for this period? 2. Beta is often estimated by linear regression. A model often used is called the market model, which is: Art-? ARC]t + [Arm-? Rot] + Et In this regression, Art is the return on the stock and Rot is the risk-free rate for the same period. Arm is the return on a stock market index such as the S&P 500 index. AI is the regression intercept, and Bi is the slope (and the stocks estimated beta). Et presents the residuals for the regression.
What do you think is the motivation for this particular regression? The intercept AI is often called Sense’s alpha. What does it measure? If an asset has a positive Sense’s alpha, where would it plot with respect to the SMS? What is the financial interpretation of the residuals in the regression? 3. Use the market model to estimate the beta for American Standard using the last 36 months of returns (the regression procedure in Excel is one easy way to do this). Plot the monthly returns on American Standard against the index and also show the fitted line. Ever the number of months that should be used in the calculation.
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