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Mark The Following True or False
1) The Firm's cost of capital may also be referred to as the firm's opportunity cost of capital.
2) Corporations have two costs of common equity, one for retained earnings and one if the company issues new stock.
3) A security with a reasonably stable price will have a lower required rate of return than a security with an unstable price.
4) A short term T-bill's rate of return should be used in the CAPM formula to determine the cost of equity capital regardless of the length of the project under construction.
The expected return on the S&P 500 is 10% and the risk-free rate is 3%. What is the expected return on the investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4?
how the fed should respond to prevailing conditions.consider the existing economic conditions including inflation and
A project will produce an operating cash flow of $14,600 a year for 7 years. The initial fixed asset investment in the project will be $48,900. The net after tax salvage value is estimated at $12,000 and will be received during the last year of the p..
App Store Co. issued 20-year bonds two years ago at a coupon rate of 6%. The bonds make semiannual payments. If the YTM on these bonds is 10% (compounded semiannually), what is the current bond price?
Curtis Corporation's noncallable bonds currently sell for $1,165. They have a 15-year maturity, an annual coupon of $95, and a par value of $1,000. What is their yield to maturity?
Prepare journal entries to record the April purchases of trading securities by Business Solutions and prepare the adjusting entry to record any necessary fair value adjustment to its portfolio of trading securities.
Winners Games reported sales of $72,000 and net income totaling $12,000 during the year. It’s selling price is $6 per unit, its variable cost is $2 per unit, and its total fixed costs are $36,000. How much is the projected margin of safety? What is a..
On August 1, Sonya sells short 100 shares of PDQ company stock for $100 per share. On October 2, Sonya closes out the short sale at a cost of $90 per share. What is Sonya's profit or (loss) on the transaction?
The Taylors have purchased a $220,000 house. They made an initial down payment of $10,000 and secured a mortgage with interest charged at the rate of 6%/year on the unpaid balance. Interest computations are made at the end of each month. If the loan ..
Kale Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, what is the firm's total corporate value, in millions? Free cash flow in y..
Karen is a trusted employee whose productivity declines as she works more and more hours each day. After careful observation of her work performance, her manager prepared the following chart. Karen's total cost to the firm is $11 per hour. Each work ..
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.4 million in annu..
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