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You expect to receive an uncertain cash flow of $1, 210 in two years. Your cost of capital is 10% (APR) compounded annually and the risk-free rate is 2% (APR) compounded annually. Excluding compensation for the time value of money, how much extra compensation do you require for bearing risk? Your answer should be exact and entered in dollars. (Example: $1.01 would be entered as 1.01)
Your division is considering two facility investment projects, each of which requires an upfront expenditure of $15 million. What are the project's net present values, assuming the cost of capital is 10%, 5%, 15%. What does this analysis tell you abo..
A project requires $353,268 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.9..
Buster’s Beverages is negotiating a lease on a new piece of equipment that would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because the firm plans to move to a new faci..
A stock has an expected return of 12.2 percent, the risk-free rate is 4 percent, and the market risk premium is 10 percent. What must the beta of this stock be? (Do not round intermediate calculations and round your final answer to 2 decimal places. ..
Quarles Industries had the following operating results for 2015: sales = $29,500; cost of goods sold = $19,760; depreciation expense = $5,260; interest expense = $2,640; dividends paid = $1,450. At the beginning of the year, net fixed assets were $17..
Your broker offers to seel you some shares of Bahnsen & Co. common stock that paid a dividend of $2.00 yesterday. Bahnsen's dividend is expected to grow at 5% per year for the next 3 years. Given that the first dividend payment will occur 1 year from..
A firm has sales of $4,780, costs of $2,580, interest paid of $173, and depreciation of $481. The tax rate is 34 percent. What is the value of the cash coverage ratio?
The market value of the marketing research firm Fax Facts is $450 million. The firm issues an additional $150 million of stock, but as a result the stock price falls by 2%. What is the cost of the price drop to existing shareholders as a fraction of ..
Using the Black-Scholes model, explain what happens to the value of a call as S, T, and s2 change. Why is the relationship between risk and price different for options than for other securities?
Stock X was just added to the Dow 30 Index. Prior to the addition, the correlation between the daily returns of X and the other 29 stocks in the Index was +0.40. How do you expect the daily return correlation to change after X is added to the Dow 30 ..
Weston Industries has a debt-equity ratio of 1.5. Its WACC is 10.5 percent, and its cost of debt is 6 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 capital W..
How much would you pay for a share of Woo financial services today? Show all work
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