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Quipta is a semi-conductor manufacturing firm with three divisions. These are Tools (TL), which constitutes 40 percent of the assets of the firm, Digital Equipment (DE), which constitutes 25 percent of the assets and Foundry Equipment (FD), which constitutes the remaining 35 percent of the assets. The unlevered betas of the three divisions (defined as the beta of the division if it were independent and 100% equity financed) are βUTL = 1.5, βUDE =0.7 and βUFD = 0.5. Quipta’s debt-to-equity ratio is 3/7 and the corporate tax rate is 34%. The expected return on the market portfolio is 13 %. Quipta can borrow at the risk free interest rate of 4%. Calculate the expected return on the equity for Quipta.
Should the company follow the residual dividend policy? Why or why not?
Dinklage Corp. has 9 million shares of common stock outstanding. Both bonds make semiannual payments. What is the company’s WACC?
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 9.25 percent a year, a debt–equity ratio of .50, and a dividend payout ratio of 27.5 percent. The ratio of total assets to sales is constant at 1.25. What profit margin must the ..
You have a short position in a put option on Apple Inc. common stock. The option has an exercise price of $122 and the stock is currently trading at $124.70. The option premium is $3.60 per contract. What is your net profit/loss if Apple Inc. stock p..
John Brown lived in a family that always used the phrase “a penny for your thoughts?” John works at a company with 400 employees
A managed fund will outperform an index fund only 60% of the time. Managed funds may be open-end funds or closed-end funds. A benchmark of a good fund manager is the ability to increase share value when the economy is good and retain that value when ..
A $1,000 par value bond is currently selling in the marketplace. It had an original maturity of 25 years and was sold 11 years ago. Its coupon rate is 8% and you are to determine its current price, given bonds of comparable risk have a yield to matur..
Great Wall Pizzeria issued 12-year bonds one year ago at a coupon rate of 6.9 percent. If the YTM on these bonds is 9.1 percent, what is the current bond price?
You own a portfolio that has $2,000 invested in Stock A and $3,100 invested in Stock B. Assume the expected returns on these stocks are 10 percent and 16 percent, respectively. Required: What is the expected return on the portfolio?
Suppose the Texas lottery advertises that it pays its winner $10 million. However, this prize money is paid at the rate of $500,000 each year (with the first payment being immediate) for a total of 20 payments. What is the present value of this prize..
The present value of a future dollar is less than one dollar. The present value of a future dollar is more than one dollar. The present value of a future dollar is equal to one dollar. The present value of a future dollar cannot be determined.
What will Worldwide Widget Manufacturing have to make as a semiannual interest rate payment?
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