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You are managing a portfolio of 10 stocks which are held in equal dollar amounts. The current beta of the portfolio is 1.55, and the beta of stock a is 2.0. If stock A is sold and the proceeds are used to purchase a replacement stock, what does the beta of the replacement stick have to be to change the portfolio beta to 1.7?
A. 4.4
B. 5.3
C. 3.2
D. 3.5
E. 4.1
2. Reliable Cars has sales of $3,800, total assets of $3,350, and a profit margin of 5 percent. The firm has a total debt ratio of 41 percent. What is the return on equity?
A) 12.20 percent
B) 13.83 percent
C) 5.67 percent
D) 9.61 percent
E) 8.47 percent
Avicorp has $14.2 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93% of par value. What is Avicorp’s pre-t..
How much would the return for US oil have to increase before it would be beneficial to increase the investment in this stock? How much would the return for Huber Steel have to decrease before it would be beneficial to reduce the investment in this st..
If a company has constrained capital, then it can only take on a limited number of projects. The NPV decision criterion is true when all projects are independent and the company has a sufficient source of funds to accept all positive NPV projects. Tw..
Your research has determined the following: Company (Co.) A current dvd is 1.36, Beta = 1.7 and P/E is 23. Cash flow to equity per share is 4.72. Current risk free rate is 2.5% and the expected market return is 10%. Co. A ROE is 16% and has an EPS of..
Using Rhodes Corporation’s financial statements (shown below), answer the following questions. What is the net operating profit after taxes (NOPAT) for 2010? What are the amounts of net operating working capital for both years? What are the amounts o..
Your brother has asked you to help him with choosing an investment. He has $7,400 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 0.0500 annually with the interest being paid quarterly. What will be the..
Smith Inc. issued a bond with an annual coupon rate of 10% with interest paid Semi annually. The bond matures in 15 years. The par value of the bond is $1,000. If your required return for this type of bond is 15%, what is the price you are willing to..
Loan amortization and EAR You want to buy a car, and a local bank will lend you $35,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 9% with interest paid monthly. What will be the monthly loan pay..
Which of the following is a true regarding the appropriate tax rate to be used in the WACC?
Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?
You construct a price-weighted index of 78 stocks. At the beginning of the day the index is 9,364.36. During the day, 77 stock prices remain the same, and one stock price increases $4.30. At the end of the day, your index value is 9,417.95. What is t..
Compute the present value of a $1,000 cash flow for the following combinations of discount rates and times:
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