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1. You are considering an investment in Badger, LLC. You know that the firm’s total risk is 20%, its systematic risk is 0.8, the one-month treasury bill rate is 1.2%, the 30-year treasury rate is 3.0%, and the average market return is 7.0%. What is the expected return according to the CAPM?
a. 20.00%
b. 5.84%
c. 7.52%
d. 9.28%
e. 6.20%
2. You are analyzing a project and have developed the following estimates: unit sales = 3,100, price per unit = $215, variable cost per unit = $115, fixed costs = $164,000. The depreciation is $59,000 a year and the tax rate is 35 percent. What effect would the sale of one more unit have on the operating cash flow?
a. 60.90
b. 61.40
c. 61.80
d. 65.00
e. 65.70
If their combined life expectancy is 15 years at their retirement, can the Bruckners maintain their standard of living if they have the amount determined above and their funds earn 7 percent after they retire? What is the future rate of inflation ass..
You’ve just opened a margin account with $15,000 at your local brokerage firm. You instruct your broker to purchase 700 shares of Landon Golf stock, which currently sells for $53 per share. What is your total dollar return from this investment? What ..
Your firm offers a 20-year, semiannual coupon bond with a yield to maturity of 8.35 percent, a face value of $1,000, and a market price of $1,054. What is the coupon rate? How would a financial manager determine optimal capital structure? How would t..
John opens a brokerage account and purchases 300 shares Starbucks at $40 per share. He borrows $4000 from his broker to help pay for the purchase. The interest rate on the loan is 8%. What is the margin in John's account when he first purchases stock..
During the year, the Senbet Discount Tire Company had gross sales of $1.07 million. The firm’s cost of goods sold and selling expenses were $526,000 and $216,000, respectively. The firm also had notes payable of $810,000. These notes carried an inter..
Compute the least squares regression line and the least absolute deviations regression line of SHIP versus TIME and superimpose these two lines onto the scatterplot of TIME and SHIP.
A client in the 33 percent marginal tax bracket is comparing a municipal bond that offers a 5.80 percent yield to maturity and a similar-risk corporate bond that offers a 7.10 percent yield. Determine the equivalent taxable yield.
You plan to invest $3343 in a money market account which will pay an annual stated (simple) interest rate of 7.27 percent, but which compounds interest on a weekly basis. If you leave this money on deposit for 10 years, what will be your ending balan..
Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. Calculate the NPV for each type of truck. Ro..
Hedging exchange rate risk (LO21-3) You are the vice president of finance for Exploratory Resources, headquartered in Houston, Texas. In January 2010, your firm’s Canadian subsidiary obtained a six-month loan of 150,000 Canadian dollars from a bank i..
Kane Corporation’s bonds pay coupon payments semi annually and have a $1,000 par value, a 11% coupon, 16 years to maturity, and an 14% YTM. What is the bond’s price?
Tyler Trucks stock has an annual return mean and standard deviation of 12.0 percent and 41 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 23.0 percent and 67 percent, respectively. What is..
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