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Intel Corp. (INTC) has a capital structure consisting almost entirely of equity.
a. If the beta of INTC stock equals 1.6, the risk-free rate equals 6 percent, and the expected return on the market portfolio equals 11 percent, what is INTC's cost of equity?
b. Suppose that a 1 percent increase in expected inflation causes a 1 percent increase in the risk-free rate. Holding all other factors constant, what will this do to the firm's cost of equity? Is it reasonable to hold all other factors constant?
What other part of the calculation of the cost of equity is likely to change if expected inflation rises?
Suppose that you are holding a 5% coupon bond maturing in a year with a face value of $1000. The current market interest rate or yield to maturity is 8%. If the market interest rate falls from 8% to 6% over the course of the year, what is the one per..
The cash option amount is determined by discounting the winning amount at 8% over 22 years. - This week the lottery is worth $5 million to a single winner. What would the cash option payout be?
A company currently pays a dividend of $1.75 per share (D0 = $1.75). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of..
Discuss the advantages and disadvantages of margin accounts vs. cash accounts. State at least one advantage and disadvantage.
You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 14 percent and 17 percent, respectively. The standard deviations of the assets are 40 percent and 48 percent, respectively.
One year ago, the Chinese e-commerce company Alibaba Group floated its shares in the biggest Initial Public Offering in US history. Alibaba Group priced its shares at $68 raising $21.8 bn and valuing the company at $167.6 bn. What is the payout ratio..
You have $34,211.54 in a brokerage account, and you plan to deposit an additional $4,000 at the end of every future year until your account totals $270,000. You expect to earn 10% annually on the account. How many years will it take to reach your goa..
You are 30 years old today and planning to retire at age 62. You want to plan your finances for living 35 years past age 62 and die dead broke. You determine you will need $3000 per month from age 62 for the 35 years. Your plan is to go live in the t..
Describe the relation between the payoff and st.ock price.- Describe why the strategy would be undertaken.- Under what circumstances will the strategy have a beneficial payoff.
A new piece of equipment costs $18,000 with a residual value of $600 and an estimated useful life of five years. Assuming twice the straight-line rate, the book value at the end of year 2 using the declining balance method is? A 11,520 B 6,480 C 18,0..
Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be i..
Based on all of the information above, write an online branding proposal for Premier Portraits. Who specifically should Premier Portraits target with the new branding message? What product should Premier Portraits really offer to this market? What va..
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