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Suppose that investors have recently become more risk averse, so market risk premium has raised. Also, suppose that the risk free rate and expected inflation have not changed. Which of the following is most likely to occur?
- The required rate of return for an average stock (beta = 1) will increase by an amount equal to the increase in the market risk premium.
- The required rate of return will decline for stocks whose betas are less than 1.0.
- The required rate of return on the market, rM, will not change as a result of these changes.
- The required rate of return for each individual stock in the market will increase by an amount equal to the increase in the market risk premium.
- The required rate of return on a riskless bond will decline
Discuss on two projects that require an investment in the firm.
Gordon company issued $1,000,000 10 year bonds and agreed to make annual sinking fund deposits of $80,000.00. What amount will be in sinking fund at the end of ten years?
Explain Accounts receivables and No other asset build-up will be required to service the new accounts
If mortgage rates increase from 5% to 10%, but the expected rate of increase in house prices increases from 2% to 9%, are people more or less likely to buy houses? ( Show your work to receive full credits).
A company current balance sheet is as follows: calculate the firm's weighted-average cost of capital at various combinations of debt and equity, given the following data?
Four months ago, you purchased 1,500 shares of Lakeside Bank stock for $11.20 a share. You have received dividend payments equal to $0.25 a share.
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At the Starting of September, Stanley Neal Started Neal's Investment Services, a firm that offers advice about investing and managing money. On September 30, the accounting records of the business showed the following data.
Explain Capital Budgeting Techniques for Supernormal Growth and Dividends are expected to grow at a 25 percent rate for the next 3 years and with growth rate falling off to a constant 8 percent thereafter
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