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Finding Cost of Equity by using CAPM and NPV of the project with that rate.
1. A MNC can lend without risk at 3% and the return to the company is 9%. If a project has a β = 1.5 compared to the other investments of the company, what is the project's required rate of return?
2. An overseas project costs the equivalent of $1,000,000 in Argentine Pesos. Assume the F/X rate is hedged for the lifetime of the project and will be $0.50/Argentine Peso. The project will have a lifetime of four years and have no salvage value. The net cash flows will be constant and ARS 1,500,000 per year, except for the fourth year when it will be ARS 2,700,000. The cash flows take all costs into account, except for possible interest payments in Argentina (if the subsidiary borrows locally). The parent can convert this amount into the ARS and invest its own money or the subsidiary fund the entire project locally at 10% per year. The parent's discount rate for Argentina is 9%. How should the project be financed? Justify your answer numerically.
Calculation of NPV and IRR and MIRR and Profitability Index and Besides future cash flows what other financial criteria would you consider in making your decision between two or more alternatives
If Carson issues bonds, it would be a relatively small bond offering. Should Carson consider a private placement of bonds. What type of investor might be interested in participating in a private placement
The last dividend paid by Abbot Labs was $1.00. Abbot's growth rate is expected to be a constant 8% for three years, after which the growth rate is expected to be 10%. Investors require a return of 16% on stocks like Abbot. What should the price o..
Find the true statement
At age 25 you spend $2,000 that earns 6 percent each year. At age 35 you invest $2,000 that earns 9 percent per year. In which case would you have more money at age 60?
Explain what extent do different theories of financial markets recognize a distinction between risk and uncertainty
A broker offers to sell you shares of Bay Area Healthcare which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 4% per year. The stock's required rate of return is 12%.
How much are estimated monthly variable costs using the high-low method?
The yield on Treasury bonds has increased because the government wants to borrow more from the public. The demand for money will
What would be the value of this bond if interest rates fall to 5% the day after it is purchased? If interest rates fell to 5% after one year, what would the bond be worth at that point?
You are considering a project in Poland which has initial cost of 275,000PLN. The project is expected to return one-time payment of 390,000PLN four years from now.
Demonstrate that holding stock A actually reduces risk by comparing the risk of a portfolio equally weighted between stock B and T-Bills with a portfolio equally weighted between stocks B and A.
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