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Stock Y has a beta of .98 and an expected return of 10.30 percent. Stock Z has a beta of .80 and an expected return of 9 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Risk-free rate %
Valley Corporation is attempting to select the best of a group of independent projects competing for the firm's fixed capital budget of $4.5 million. The firm recognizes that any unused portion of this budget will earn less than its 15% cost of capit..
In March 2006, General Motors (GM) announced that it needed to restate its previous year's financial statement. Excerpts from the Wall Street Journal describing the restatements include: Many of the other GM problems relate to rebates, or credits, fr..
One advantage of debt financing over equity financing is? What is the WACC for a firm using 65% equity with a required return of 15%; 35% debt with a YTM of 8%, and a tax rate of 35%?
ABC Telecom Inc.has preferred stock that pays a dividend of $5 per share and sells for $100 per share. It is considering issuing new shares of preferred stock. These new shares incur an underwriting ( or flotation ) cost of 2.2%. How much will ABC Te..
Pay is stressed in several of the cases and some of the content in the reading. How much influence do pay differentials between employees at different levels have on commitment, cohesiveness and relationships within an organization?
It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like to use the CME December futures contract on the S&P 500 to change the beta of the portfolio to 0.5 during the period July ..
A leading producer of fine cast silver jewellery is considering the purchase of new casting equipment that will allow it to expand its product line. The up-front cost of the equipment is $750,000. The company expects that the equipment will produce s..
If you have your own business how would you develop a short-term financing plan that meets your need for cash? What are some of the major sources of short-term financing you would consider?
In your new position as head accountant (so OK – you’re the only accountant but it will sound better on your resume) working for Mr. Moore, you note that last month on July 2, 2013, they bought “research equipment and certain special tools” for $60,0..
You bought one of Bergen Manufacturing Co.’s 8.5 percent coupon bonds one year ago for $1,064. These bonds make annual payments and mature eleven years from now. Suppose you decide to sell your bonds today when the required return on the bonds is 6 p..
What is capital investment analysis? Why are capital investment decisions so important to businesses? What is the purpose of pricing capital investments into categories, such as mandatory replacement, or expansion of existing products, services, or m..
Amanda's Interior Design has sales of $462,000, costs of goods sold of $308,000 and average accounts receivable of $48,900. How long does it take its credit customers to pay for their purchases?
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