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Booher Book Stores has a beta of 0.4. The yield on a 3-month T-bill is 3.5% and the yield on a 10-year T-bond is 6%. The market risk premium is 7%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.
A stock has a beta of .65, the expected return on the market is 15 percent, and the risk-free rate is 3.40 percent. What must the expected return on this stock be?
A company offers a 6% coupon bond with a yield-to-maturity of 6.5% compounded semi-annually. The bond pays interest semi-annually and matures in twelve years. If the par value is $1,000, then what is the current bond price? Round your answer to two d..
Compute the cost of capital for the firm for the following: a. A bond that has a $1,000.00 par value (face value) and a contract or coupon interest rate of 11.7 percent. Interest payments are $58.50 and are paid semiannually. A preferred stock that s..
Zerox Copying Company plans to borrow $174,000. New Jersey National Bank will lend the money at one-half percentage point over the prime rate at the time of 13.50 percent (14 percent total) and requires a compensating balance of 20 percent. What woul..
You would like to purchase a car that costs $25,000. You have $5,000 to use as a down payment and have found financing for the remainder at a rate of 6.25%. The financing repayment plan requires equal monthly payments for 4 years. What will your paym..
you purchased a machine for $ 1.13 million three years ago and have been applying? straight-line depreciation to zero for a? seven-year life. Your tax rate is 40 %. If you sell the machine today? (after three years of? depreciation) for $ 772000, wha..
You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $800,000. The mortgage is currently exactly 18.5 years old, and you have just made a payment. If the..
Merlo, Inc. maintains a debt-equity ratio of 0.25 and follows a residual dividend policy. The company has after-tax earnings of $3,800 for the year and needs $3,200 for new investments. What is the total amount Merlo will pay out in dividends this ye..
Lottie's Boutique needs to maintain 12 percent of its sales in net working capital. Lottie's is considering a 3-year project which will increase sales from their current level of $110,000 to $130,000 the first year and $145,000 a year for the followi..
When Gordon told Hanson that he was considering selling his house, Hanson offered to buy it. Gordon and Hanson entered into a contract in which Hanson paid Gordon $1,000 in cash for the right to buy Gordon's house for $150,000 in the event Gordon dec..
Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $59 million. Zang currently has 3 million shares outstanding and will issue 1.5 mill..
Explain why the Black option on futures pricing model is simply a pricing model for options on instruments with a zero cost of carry?
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