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You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 18 percent, –14 percent, 20 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 4.4 percent.
What was the average real risk-free rate over this time period?
What was the average real risk premium?
General Matter’s outstanding bond issue has a coupon rate of 9.4%, and it sells at a yield to maturity of 7.80%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face..
After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $99 today and $499 per month for the next three years..
Big Sky Hospital plans to obtain a new MRI that costs $2.5 million and has an estimated four-year useful life. It can obtain a bank loan for the entire amount and buy the MRI or it can lease the equipment. Assume now that the salvage value estimate i..
Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1382 per unit; variable costs = $263 per unit; fixed costs = $3925292; quantity = 70721 units. Suppose the company believes all of its estimates are acc..
Marichal Motors is considering an investment in a proposed project. Rather than making the investment today, the company wants to wait a year to collect additional information about the project. What is the expected NPV (in today's dollars) if the co..
It is often stated that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?
Discuss some of the pros and cons of using debt as a long-term source of capital funding for a company. Why does using an appropriate amount of debt increase the value of the firm"
The expected return on the market portfolio is 17 percent, and the return on the risk-free security is 5 percent. What is the expected return on a portfolio with a beta equal to 0.5?
Nine years ago the Singleton Company issued 20-year bonds with a 12% annual coupon rate at their $1,000 par value. The bonds had a 8% call premium, with 5 years of call protection. Today Singleton called the bonds. Compute the realized rate of return..
A Treasury bond with the longest maturity (30 years) has an ask price quoted at 97:06. The coupon rate is 2.70 percent, paid semi annually. What is the yield to maturity of this bond?
Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran, by contract, will retire at the end of exactly 12 years. How large a sum must Sunrise accumulate by the end of ye..
Multiple IRRs for a particular project can occur when there is (are):
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