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1. The risk-free rate is 3%, the expected market rate of return is 9%, if you expect a stock with a beta of 1.5 to offer a rate of return of 12%, you should
a) buy the stock because it is overpriced
b) sell short the stock because it is overpriced
c) sell short the stock because it is underpriced
d) buy the stock because it is underpriced
e) none of the above as the stock is fairly priced
2. You are considering acquiring a common stock that you'd like to hold for one year. You expect to receive both $1.50 in dividends and $42 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today if you wanted to earn a 10% return is closest to
a) $38.50
b) $39.15
c) $39.55
d) $47.85
An investor in the 20% Marginal tax bracket is looking at buying Harrisburg, PA notes. The Yield is 4.25% on the notes. What is the Taxable Equivalent Yield?
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. What is the maximum price per share Schultz should pay fo..
Whitewater Inc. has a debt of 20,000,000 Euro and the value of levered equity is 14,500,000 Euro. The company keeps a constant debt policy. Also the company has a constant and perpetual EBITDA. Knowing that the corporate tax rate is 36% and that the ..
A loss on the sale of an asset that is depreciable and used in business is ________; a loss on the sale of a non-depreciable asset is ________.
Various management actions provide investors with clues as to the future prospects for the firm. Which of the following actions by management contains the most positive economic information for common stock investors?
Charter Corp has issued 2,500 debentures with a total principal value of $2500000. The bonds have a coupon interest rate of 7%. a. What dollar amount of interest per bond can an investor expect to receive each year from charter? b. What is Charter's ..
You are given the following information for Calvani Pizza Co.: sales = $50,000; costs = $22,600; addition to retained earnings = $7,150; dividends paid = $2,600; interest expense = $5,000; tax rate = 35 percent. Calculate the depreciation expense.
Explain how Level 1, Level 2, and Level 3 assets differ. Which asset type is the riskiest? Explain why.
Review the financial data - The company has narrowed the choice to the following two alternatives, with the cash flow information being available - Post an explanation of the tools that you believe would help you to reach a decision. If you were a..
An exchange rate is currently 0.8000. The volatility of the exchange rate is quoted as 12% and interest rates in the two countries are the same. Using the lognormal assumption, estimate the probability that the exchange rate in 3 months will be a) Le..
Kern Corporation entered into an agreement with its investment banker to sell 10 million shares of the company's stock with Kern netting $225 million from the offering. The expected price to the public was $25 per share. The out-of-pocket expenses in..
A company has $50 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?
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