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The DJIA (Dow Jones Industrial Average) is a price weighted index consisting of thirty bluechip company stocks. AAPL, GE, and MMM etc. are all components of the DJIA. Year to date, the DJIA has dropped by 10%. Assume that at the beginning of this year, you started a portfolio with $1000 invested in each of the thirty companies in the DJIA. Can you conclude that year to date, the return of your portfolio is also -10%? Assume that there is no change in the DJIA components and also ignore any dividends.
We have the Washington firm on which we have the following information. Its bheta unlevered is 3, its D/E is 4/1, and its tax rate is .3. Additionally we know that the default free rate is 5% and the stock market has returned 11 % over a long period ..
XYZ Renovations Inc. is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC (and even negative), in which case it will be rejected. Year Cash Flow 0 ($5..
Soprano’s Spaghetti Factory issued 18-year bonds two years ago at a coupon rate of 6.50 percent. If these bonds currently sell for 94.95 percent of par value, what is the YTM? Atlantis Fisheries issues zero coupon bonds on the market at a price of $4..
The Erley Equipment Company purchased a machine 5 years ago at a cost of $80,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,000 per year. What are the increment..
Laurel Electronics reported the following information at its annual meeting: The Company had cash and marketable securities worth $1,235,455, accounts payables worth $4,159,357, inventory of $7,120,400, accounts receivables of $3,452,400, short-term ..
All of the following are useful purposes of pro forma financing except?
Each of the following potentially alters the rate sensitivity of the underlying instrument. Presumably there is an embedded option associated with each. Commercial loan with a two-year maturity and a floating rate set at prime plus 2.5 percent. There..
Felicia & Fred are considering the introduction of a new product line of jewelry featuring crystals imported from the Czech Republic. The manufacturing plant offers crystals in all colors, sizes, and shapes cut to the design specifications of their c..
In what way would the benefits of backdating be reduced if a stock option grant had to be revalued at the end of each quarter?
You own 1,800 shares of stock in Avondale Corporation. You will receive a $1.50 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $80 per share. The required return on Avondale stock is 25 percent. Suppose you ..
Stock Y has a beta of .85 and an expected return of 15.90 percent. Stock Z has a beta of .60 and an expected return of 10 percent. If the risk-free rate is 6.0 percent and the market risk premium is 10.2 percent, what are the reward-to-risk ratios of..
firm a stated rate of 10 percent interest. What is the effective rate of interest if the loan carries a simple 10 percent interest with a 20 percent compensating balance
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