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Cost of Equity
Suppose you are trying to estimate the cost of equity for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). If the risk-free rate is 4.4%, the expected market risk premium is 5.5%, and the beta is 1.3 for this firm's equity, what would be the expected cost of equity for this firm using CAPM?
Suppose that a US interest rate is 4% and the forward rate for the Korean won is 1 won = $0.001 and the spot rate is 1 won = $0.0011. What is the interest rate in the Korean market? (Assume that the US is home and the interest rate parity holds.) Ple..
The assets of Dallas & Assoc. consist entirely of current assets and net plant and equipment. The firm has total assets of $ 2,606,694 and net plant and equipment of $ 1,103,618. The company has notes payable of $ 140,331, long-term debt of $ 823,770..
The head of the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the company's value under several possible growth scenarios and the assumption that the company’s many divisions will remain..
Consider the following cash flow [-100, + 230, -132]. We want to decide under what range of discount rate this is an advantageous investment. But noting the change in sign, we conclude IRR is not a suitable instrument.Write the expression for NPV usi..
Tarea purchased 55 municipal bonds with a par value of $100 each and a coupon rate of 5.5% with a maturation date of 2023. The municipal bond coupons payout semi annually, what interest payment should Tarea expects to receive every 6 months for the n..
A large retailer obtains merchandise under the credit terms of 3/20, net 40, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's e..
An asset has had an arithmetic return of 10.5 percent and a geometric return of 8.5 percent over the last 94 years. What return would you estimate for this asset over the next 12 years? 18 years? 32 years?
Triad Corporation has established a joint venture with Tobacco Road Construction, Inc., to build a toll road in North Carolina. The initial investment in paving equipment is $20 million. The equipment will be fully depreciated using the straight-l..
What should be the price of a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%? Select one: a. $22.86 b. $28.00 c. $42.00 d. $43.75
More and more businesses are realizing greater profit potential by selling their products and services in other countries on an international scale. However, there are challenges that businesses face when exposed to foreign exchange risk in addition ..
Moby Dick Corporation has sales of 4,912,720; income tax of 503,624; the selling, general and administrative expenses of 274,579; depreciation of 397,181; cost of goods sold of 2,639,530; and interest expense of 123,651. Calculate the amount of the f..
Mark Cuban will receive $18 500 a year for the next 25 years as a result book he wrote. if a discount rate of 12% is applied should he be willing to sell out his future interest for 165,000?
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