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The common stock of Marielle Machinery will generate the following payoffs to investors next year:
Dividend
Stock Price
Boom
$8
$240
Normal
4
90
Recession
0
The common stock of Escapist Films will generate the following payoffs to investors next year:
$0
$18
1
26
3
34
Marielle Machinery and Escapist Films stocks are selling today for $90 and $30 a share, respectively. Calculate the expected rate of return and standard deviation of returns for both companies. Then calculate the expected return and standard deviation of a portfolio half invested in Marielle Machinery and half invested in Escapist Films.
Revarop, Inc., is a fast-growth company that is expected to grow at a rate of 23 percent for the next four years. It is then expected to grow at a constant rate of 6 percent. Revarop’s first dividend, of $4.45, will be paid in year 3. If the required..
A manufacturer of video games develops a new game over two years. This costs $850,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.2 million per year for three ..
B of A has a Beta of 1.65, and the current environment requires a market risk premium of 6.00% after accounting for a risk-free rate of 4.00%. The company is expected to pay a dividend of $3.00 (D1) and that dividend is expected to grow at a constant..
Suppose 1 U.S. dollar equals 1.60 Canadian dollars in the spot market. Six-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). Six-month U.S. securities have an annualized return of 6.5% and a 6-month..
Suppose an investment offers to triple your money in 48 month What rate of return per quarter are you being offered?
Explain which government agency or agencies a financial manager must deal with and what laws are involved:- develop a good case for and against the regulation of financial institutions.
Consider two stocks, Stock D, with an expected return of 16 percent and a standard deviation of 31 percent, and Stock I, an international company, with an expected return of 9 percent and a standard deviation of 19 percent. The correlation between th..
Explain how a net present value (NPV) profile is used to compare projects. How does this compare to internal rate of return (IRR)? How does reinvestment affect NPV and IRR?
Lohn Corporation is expected to pay the following dividends over the next four years: $18, $14, $13, and $7.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 1..
You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $400,000; accounts receivable = $1,200,000; inventory = $2,100,000; accrued wages and taxes = $..
You observe the following in relation to a 4-month European put option on the S&P200 index. Use Black-Scholes option pricing model to value the put option. State any assumptions you make. Take into consideration different compouding. Please do manual..
Looking at the exhibit on page 571 Investment Analysis and Portfolio Management (10th edition), by Frank Reilly that graphically portrays the characteristics of value and growth stocks, briefly explain why you would use the “top down” and “bottom up”..
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