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You have been asked by the director of finance to put together a plan to invest in other companies. Your plan will manage a mutual fund with a $20 million portfolio with a beta of 1.50. Assume that the risk-free rate is 4.50%, and the market risk premium is 5.50%. You expect to receive an additional $5 million, which you plan to invest in a number of stocks. After investing the additional funds, you want the fund's required return to be 13%.
What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return? Attach your Excel file showing your calculations.
In a Word document, explain the steps you used to arrive at your answers.
What does your calculated beta mean to UPC?
Should UPC be concerned about the use of betas in making investment decisions?
What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? Round your answer to two decimal places.
Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity cots and externalities should be included. Give an example of each.
Compute the amount of the bonus payable to the employees at year-end.
The firm's WACC is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?
Teddy's Pillows has beginning net fixed assets of $462 and ending net fixed assets of $532. Assets valued at $310 were sold during the year. Depreciation was $24. What is the amount of net capital spending?
Where should the line be drawn on what type of bids our country should accept from foreign countries to prevent threats to our national security?
What opportunity is open to an arbitrageur when a 180-day European call option to buy 1 Euro for $1.3083 costs $0.02 per Euro? Assume the size of forward and options contracts to be 1,000,000 Euros each. Ignore borrowing costs.
A Corporation just issued a dividend of $2.30 per share on its common stock. The company is expected to maintain a constant 6% growth rate in its dividends indefinitely.
Describe the challenge of estimating or coming with the good feel for "cost of equity capital" or rate of return that you feel Under Armour investors require as the minimum rate of return that they expect of require Under Armour to earn on their in..
The market prices of the options are $2.75 and $1.50, respectively. The options have the same maturity date. Describe the investor's position.
What is your opinion of financial analysts who are technical analysts? Or those who are fundamental analysts? Which type do you believe is the most accurate, and why?
You have won the mandate and Severn Trent PLC has asked you price a 5 year GBP parbullet bond issue for them, with Price, Coupon, Yield to Maturity and Modified Duration.
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