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AB Corporation has two divisions, office paper and landscaping. The CFO is currently using the company’s overall WACC as the hurdle rate for all projects. AB has a company beta of 1.16 while the office paper division’s beta is 0.87 and the landscaping division’s beta is 1.3. Currently, the risk free rate is 2 percent and the market risk premium is 5 percent. The office paper division has identified two projects with expected returns of 7.5 percent and 8 percent. The landscaping division has identified two projects with expected returns of 8.2 percent and 8.6 percent. Draw a graph of the security market line. One the same graph, include a line for the company’s WACC and place an “x” in the appropriate position on the same graph for each of the four projects. Using the CFO’s criteria, which of the projects will be accepted? Which of the projects should NOT be accepted if analyzed properly?
Name three controls of weather and climate.
The standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 1.5. The standard deviation of monthly changes in the futures price of live cattle for the closest contract is 1.2. The correlation between the futures..
Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $15,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,000 and $12,000 at the end of Years 1 and 2, respectively..
Assume Brian immediately sold off the Canadian dollars received when the option was exercised. Also assume that there are 50 000 units in a Canadian dollar option. What was Brian's net profit on the put option?
Which of the following is not a valid restriction in a cooperative interest? Which of the following is not a remedy available to homeowners' associations for violations of CCRs and rules?
The sales forecast may be presented as. If the pro forma balance sheet indicates that the projected assets exceeds the projected liabilities and equity, The firm's total capital budget is the:
Suppose you owe a creditor $10,000 due in a single payment in 5 years. How much should your creditor be willing to accept now if he can earn 8% on his money? About how many years will it take for $100,000 placed in a bank account at 7% interest rate ..
Why does market efficiency matter - Efficient markets: definition and Implications and behavioral finance: the challenge to efficient markets
Lacewell Inc. recently paid a dividend of $2.00 per share. The company's dividends are expected to grow at a constant rate of 6% and the stock's required return is 13%. What is the value of Lacewell Inc.'s common stock?
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.7, 1.0, 1.4, and 1.6, respectively. What will the WACCs be for each div..
Valence Electronics has 217 million shares outstanding. It expects earnings at the end of the year of $760 million. Valence pays out 40% of its earnings in total. 15% paid out as dividends and 25% used to repurchase shares. If Valence's earnings are ..
Prepare a schedule the intangible section of Lewiss balance sheet at December 31, 2011. Show supporting computations in good form.
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