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Consider the following historical rate of return series:
(a) What was IBM's equity beta over this sample period?
(b) If IBM had a debt/equity ratio of 70%, what was its asset beta? (Hint: To determine a D/A ratio, make up an example in which a firm has a 70% D/E ratio.)
(c) How important is the 1992 observation to your beta estimate?
(d) If HP is similar to IBM in its business but has a debt/equity ratio of 10%, what would you expect HP's levered equity beta to be? (Hint: Use the same leverage conversion trick.)
He takes home the car today. No payments are required until the end of the fifth month, when he pays $680. Payments of $680 are then due every month until (and including) the end of month 13. What is the equivalent present value today of all payments..
Cheesburger and Taco Company purchases 14,519 boxes of cheese each year. It costs $26 to place and ship each order and $7.89 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. How many o..
Does your current organization (or an organization you have worked for in the past,) exercise good financial planning and control? Can it be improved? How? Why? Be prepared to cite real life examples as evidence.
Explain how the idea of a brewing device for a small apartment became a startup enterprise. What did you learn from that bit of entrepreneurial history
Describe short-term cash planning and how the cash budget is put together. Why does the firm needs to have this information? How does the financial manager cope with fluctuations in the cash budget?
Compensating balances are frequently a part of revolving lending arrangements with banks, yet they add to the cost of financing for the borrower. Why, then, would borrowers agree to such terms? What other types of alternative financing are available?
Undecided voters are likely to vote for the candidate they think is most likely to win. What is this phenomenon called? Why might some argue that news stations ought to stick to reporting what is actually happening on Election Day rather than making ..
You want to buy a house within 3 years, and you are currently saving for the down payment. You plan to save $7,000 at the end of the first year, and you anticipate that your annual savings will increase by 5% annually thereafter. Your expected annual..
NPV Project K costs $52,125, its expected cash inflows are $12,000 per year for 8 years, and its WACC is 12%. What is the project’s NPV? Problem 11-5 What is the project’s discounted payback period?
Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 30%, rd = 6%, rps = 8.7%, and rs = 13%. If Shi has a target capital structure of 30% debt, 5% preferre..
Lane, Inc., has an issue of preferred stock outstanding that pays a $3.35 dividend every year in perpetuity. If this issue currently sells for $90 per share, what is the required return?
An 8% semiannual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 8.2123%. What is the bond's price? What is the bond's YTM?
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