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1. The stock of Big Joe's has a beta of 1.54 and an expected return of 12.80 percent. The risk-free rate of return is 5.3 percent. What is the expected return on the market?
15.66 percent
10.17 percent
8.63 percent
4.64 percent
7.50 percent
2. The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.60 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 90 percent of its face value. What is the company's pre-tax cost of debt?
7.0 percent
4.6 percent
12.0 percent
3.0 percent
9.2 percent
3. The Auto Group has 1,000 bonds outstanding that are selling for $820 each. The company also has 8,100 shares of preferred stock at a market price of $55 each. The common stock is priced at $50 a share and there are 27,000 shares outstanding. What is the weight of the preferred stock as it relates to the firm's weighted average cost of capital?
8.52 percent
34.07 percent
51.62 percent
17.03 percent
31.35 percent
What is the present value of a 6-year annuity of $2,250 per period in which payments come at the beginning of each period? The interest rate is 10 percent. Use Appendix D for an approximate answer, but calculate your final answer using the formula an..
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from toda..
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A zero coupon bond with a face value of $1000 is issued with an initial price $507.96. the bond matures in 18 years. what is the implicit interest in dollars for the first year of the bond's life . use semi-annual compounding.
Assume the annual average return on the S&P500 is 13.7% with a standard deviation of 17.5%. A risk-free asset has an annual average return of 4.0% with a standard deviation of 0.0% and a correlation with the S&P500 index of +0.00. An investor invests..
Project K costs $55,000, its expected cash inflows are $13,000 per year for 8 years, and its WACC is 12%. What is the project's payback? Round your answer to two decimal places.
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Wolfson Corporation has decided to purchase a new machine that costs $3.2 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 35 percent. Should Wolfson lease the machine..
The Fried Green Tomato Restaurant increased its operating cycle from 140 days to 148 days while the cash cycle decreased by 3 days. How have these changes affected the accounts payable period? Quali Tech wants to raise $21 million to purchase equipme..
Explain the functions of financial markets and discuss why a dollar tomorrow cannot be worth less than a dollar the day after tomorrow.
Security I has a beta of 1.3, the risk-free rate is 4%, and the expected return on the market is 11%. What is the expected return for Security I?
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