Economy probability of state of economy rate of return

Assignment Help Financial Management
Reference no: EM131343204

Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .30 − .13 Boom .70 .25 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %

Reference no: EM131343204

Questions Cloud

What is the company unlevered cost of equity capital : Twice Shy Industries has a debt−equity ratio of 1.8. Its WACC is 9.1 percent, and its cost of debt is 7.1 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capi..
About the expected return : Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .30 − .13 Boom .70 .25 Calculate the expected return.
About the value of the firm : Tool Manufacturing has an expected EBIT of $95,000 in perpetuity and a tax rate of 35 percent. The firm has $155,000 in outstanding debt at an interest rate of 8.9 percent, and its unlevered cost of capital is 15 percent. What is the value of the fir..
Wants to increase its credit standards : Pa Bell, Inc., wants to increase its credit standards. They expect sales will fall by $50,000 and bad-debt expense will fall by 10 percent of this amount. The firm has a 15 percent profit margin on its sales. The cost of financing current assets is e..
Economy probability of state of economy rate of return : Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .30 − .13 Boom .70 .25 Calculate the expected return.
Considering an investment in project-financial intermediary : Nob-Orrow Inc. is considering an investment in a project that is similar in risk to its existing projects. The firm makes no use of debt and is entirely financed by common stock with a beta of 1.4. The expected return on the market portfolio is 10 pe..
Default free rate and market rate of return : The EBIT, Depreciation, and tax rate of a firm are $20 million, $2 million and 35% respectively. Its sales rise $5, and its inventory ratio to sales is 40%, while its accounts receivable to sales is 45%, and its accounts payable to sales is 35%. We a..
Terms of the fluctuations of the two-compute the price : There is a stock, which will not pay dividends for 6 years. Afterward, it will begin paying $1 out of a profit of $2.5 per share. We estimate that the firm will have an ROE of .20. The default free rate is 4%, the market premium is 6%, and the stock ..
Incremental revenue associated with price reduction of sause : The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.60 per jar. Suppose this action will increase sales to 316,500 jars of sauce. Wh..

Reviews

Write a Review

Financial Management Questions & Answers

  Define the type of derivative used

The advent of specific types of derivative instruments have been used by many financial institutions to hedge against exchange rate risk and as well to limit exposure to fluctuations of fair value based upon market conditions. Please select a current..

  Critiques the short-term finance policy

Write a one page memo that critiques the short-term finance policy of each company and explain which company has the better short-term finance policy. Justify your response.

  Decide how many pipe rolling machines to purchase

Managers at Midnight Manufacturing must decide how many pipe rolling machines to purchase. Each machine can process 100 pipes per hour. One machine will result in a fixed cost of $2,100 per hour, while two machines will result in a fixed cost of $3,7..

  Calculate the post tax mortgage cost for year

A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the 5th year. Calculate the Post tax Mortgage Cos..

  Rapid growth-what is projected dividend for coming year

Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 28 percent per year during the next three years, 18 percent over the following year, and then 5 percent per year indefinitely. The required return on this stock is 11 perce..

  Estimate cost to company of employee stock option issue

The stock price volatility is 25%, the 5-year risk-free rate is 5%, and the company does not pay dividends. Estimate the cost to the company of the employee stock option issue.

  What is the net present value of this lockbox arrangement

You are considering implementing a lockbox system for your firm. The system is expected to reduce the average collection time by 2.8 days. On an average day, your firm receives 2,419 checks with an average value of $1,287 each. The daily interest rat..

  Calculate the present value of the cash flow stream

Calculate the future value of $100,000 ten years from now based on the following annual interest rates: Calculate the present value of a stream of cash flows based on a discount rate of 8%. Annual cash flow is as follows: Calculate the present value ..

  Restate the one step model for the fx rate

Restate the one-step model for the FX rate in terms of Yt = 1/Xt, the value in pounds sterling of one dollar. - find q∗, the risk-neutral probability of A with respect to the pound sterling money market account.

  What is the companys unlevered cost of equity capital

Skillet Industries has a debt–equity ratio of 1.5. Its WACC is 9 percent, and its cost of debt is 5.5 percent. The corporate tax rate is 35percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capital?

  How is being a lender of last resort connected

What is a lender of last resort? How is being a lender of last resort connected to the too-bigto-fail policy?- define Regulation Q.

  What are the expected return and risk of the portfolio delta

The portfolio Alpha has an expected return of 18.50% and risk of 60%. The portfolio Gamma has an expected return of 11.75% and risk of 30%. The risk of market portfolio is 40%. Ms. Investor would like to create the portfolio Delta by utilizing the ri..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd