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Portfolio Beta Your retirement fund consists of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.25. Suppose you sell one of the stocks with a beta of 1.0 for $7,500 and use the proceeds to buy another stock whose beta is 1.85. Calculate your portfolio's new beta. Do not round intermediate calculations. Round your answer to two decimal places.
The City of Sinasonville operated a motor pool fund as an internal service fund. A loan of $500,000 was made from an enterprise fund, to be repaid over 10 years with no interest. Capital assets were purchased as follows: A budget is prepared to break..
What is the definition of the term agency problem?
Calculate the cost of each capital component, after-tax cost of debt, cost of preferred, and cost of equity with the CAPM method.
A person borrows $15,000 and has to pay the sum back in 5 annual installments starting one year from the day at which the loan is made. The interest rates are compounded annually and are variable. The first two years, the interest rate is 10% per ann..
Patton Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8% and its marginal tax rate is 40%. The current stock price is P0 = $35.00. The last dividend was D0 ..
You are provided the following information of a firm's stocks and bonds along with other pertinent information. The stocks have a standard deviation of 50% and a correlation of 0.6 with the market index. What is the beta of the stock? What is the cos..
Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.55 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $..
A fast-growing firm recently paid a dividend of $0.90 per share. The dividend is expected to increase at a 10 percent rate for the next three years. Afterwards, a more stable 5 percent growth rate can be assumed. If a 6 percent discount rate is appro..
Treasury bills are currently paying 9 percent and the inflation rate is 2.90 percent. What is the approximate real rate of interest? (Round your answer to 2 decimal places. (e.g., 32.16)) Approximate real rate % What is the exact real rate?
Megan has her home and personal property insured under an unendorsed Homeowners 3 (special form) policy. Indicate whether each of the following losses is covered. If the loss is not covered, explain why it is not covered. A garbage truck accidentally..
A bond has a coupon rate of 12 percent and 14 years until maturity. If the yield to maturity is 9.3 percent, what is the price of the bond?
Project Selection Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects: Project Size Rate of Return A $1 million 12.0% B 2 million 11.5 C 2 million 11.2 D 2 million 11.0 E 1 million..
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