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If asset A has a beta of 1.3, has an expected return of 25 percent, and the expected market return is 20 percent, what is the expected risk-free rate of return?
How do you set the minimum required return for a project? How do you compute project revenue when there is erosion? How do you compute the value of a previously acquired asset used in a new project? How do you evaluate projects from two separate divi..
Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 1.50% E(2r1) = 2.40% L2 = 0.06% E(3r1) = 2.80% L3 = 0.08% E(4r1) = 3.25% L4 = 0.13% Using the l..
Returns Year X Y 1 18 % 22 % 2 32 33 3 8 18 4 – 25 – 30 5 10 24 Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y. X Y Average return % % Variance Standard deviation % %
Booher Book Stores has a beta of 0.6. The yield on a 3-month T-bill is 3% and the yield on a 10-year T-bond is 6.5%. The market risk premium is 4%. What is the estimated cost of common equity using the CAPM?
ABC Co. has warrants that allow the purchase of two shares of its common stock at $30 per share. The common stock price per share is $33 and the market value of the warrant is $8. Calculate the intrinsic (theoretical) value of the warrant and its mar..
Sisters Haruhi and Mikuru are the joint owners of Seto Corporation; each owns 50% of the company. The value of the corporation is $450,000 and its risk in terms of σ is 0.3. Haruhi would like to buy Mikuru out and offers her cash, equivalent to Mikur..
Break-even Financing. Providence Co. needs dollars. Assume that the local one-year loan rate is 15%, while a one-year loan rate on euros is 7%. By how much must the euro appreciate to cause the loan in euros to be more costly than a U.S.-dollar loa..
Book Value versus Market Value Filer Manufacturing has 8.3 million shares of common stock outstanding. The current share price is S53, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a fa..
The Lo Sun Corporation offers a 6.0 percent bond with a current market price of $788.50. The yield to maturity is 8.40 percent. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures?
Advantage First Corporation has sales of $4,964,060; income tax of $514,886; the selling, general and administrative expenses of $224,035; depreciation of $368,851; cost of goods sold of $2,900,500; and interest expense of $101,207. What is the amoun..
The Shrieves Corporation has $20,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 8.75%, state of Florida muny bonds, which yield 6% (but are not taxable), and AT&T preferred stock, with a dividend yi..
Determine the following Economic order quantity, Total annual inventory costs of this policy and Optimal ordering frequency.
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