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A mutual fund manager expects her portfolio to earn a rate of return of 10% this year. The beta of her portfolio is .9. Assume rate of return available on risk-free assets is 3% and you expect the rate of return on the market portfolio to be 13%.
a. Calculate the expected rate of return that investors will demand of the portfolio.
b. Should you invest in this mutual fund?
Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of
Betsy and Larry Lorch own and reside in an apartment in midtown Manhattan. They left the city to avoid the uproar surrounding New Year's Eve and spent a long holiday with Larry's parents in upstate New York. They sublet their apartment to a German co..
Zach’s senior design project had a total purchased equipment cost of $3,487,000. The heat exchangers cost $178,000, the field fabricated vessels cost $676,600, pumps plus drivers cost $28,000, and the column shells cost $295,000. Purchased equipment ..
Imagine that a bank will only lend if it can earn a rate of return of 6% on a loan. Further, imagine it incurs administrative costs of $40 per loan it makes, regardless of the size of the loan. Throughout the problem, assume for simplicity that the l..
Optimal policy mix Assume that Atlas Sporting Goods, Inc., has $800,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan the return will be 12 percent. If the firm goes..
Identify two items or issues that cannot be derived from the financial statements of the two companies that you selected for your research. Explain why these items or issues would be of concern to investors and other stakeholders. In your rationale, ..
Suppose you have budgeted $ 1175 a month towards a mortgage. If you are offered a 30 year mortgage at an interest rate of 7.5%, how expensive a home mortgage can you afford?
Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $52,000 per year. Should the old riveting machine be replaced by the new one?
Net working capital investments of $50,000, $75,000, and $85,000 are expected at the end of years 1, 2, and 3 respectively. Calculate the expected net cash flows for year 3.
Draft budgeted financial statements from 2012 to 2015 under both options that provide a realistic assessment of expected revenues and costs, and explain how you have arrived at these budgeted figures.
Filer Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. Filer manufacturing also has two bond issues outstanding. Assume that the overall cost of debt is the weighted..
What is the present value of a zero-coupon bond with five years maturity, a nominal value of $1,000 and a discount rate of 6%?
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