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You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 17 percent, –4 percent, 20 percent, 12 percent, and 10 percent. Suppose the average inflation rate over this period was 2.7 percent and the average T-bill rate over the period was 5.4 percent. a. What was the average real return on Crash-n-Burn’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average real return % b. What was the average nominal risk premium on Crash-n-Burn’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) Average nominal risk premium %
You are evaluating two different silicon wafer milling machines. The Techron I costs $255,000, has a three-year life, and has pretax operating costs of $68,000 per year. For both milling machines, use straight-line depreciation to zero over the proje..
An investment for $50,000 earns a rate of return of 1% in each month of a full year.- How much money will you have at year's end?
Today is a day in May 2525 and a bond with an annual yield-to-maturity of 9.0% just yesterday paid a coupon. The bond matures in May 2543 and its quoted bond price is 130.03 percent of par (semi annual compounding). Find the coupon rate.
Avicorp has a $11.7 million debt issue? outstanding, with a 6.1% coupon rate. The debt has? semi-annual coupons, the next coupon is due in six? months, and the debt matures in five years. It is currently priced at 95% of par value. What is? Avicorp's..
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 –$ 162,000 1 54,000 2 85,000 3 69,000 Requirement 1: At a required return of 8 percent, what is the NPV of the project Requirement 2: At a required return of 20 p..
Hank purchased a $26,500 car two years ago using a 8 percent, 4-year loan. He has decided that he would sell the car now, if he could get a price that would pay off the balance of his loan. What’s the minimum price Hank would need to receive for his ..
Fama's Llamas has a weighted average cost of capital of 9.8 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.8 percent. The tax rate is 40 percent. What is the company's target debt-equity ratio?
Burgerama Inc. stock is currently trading at $12 per share and the company paid a dividend of $0.50 last year. If the stock price is expected to increase by 6% and the dividend is expected to increase by 3%, what is the expected return for shareholde..
The most important determinant of an investment's portfolio risk is which of the following? If a bank pays quarterly compounding on its savings accounts, the ending amount after one year on a $1,000 deposit will be less than if the bank paid annual c..
General forge and foundry Company has two divisions: one is very risky, and the other has significantly less risk. the company uses its investors' overall required rate of return to evaluate projects. it is most likely that the firm will. A firm's WA..
Explain the difference between bank credit risk and bank capital risk - What is the difference between lending to individual borrowers via a residential home mortgage compared to other types of consumer lending?
What is the PV of a perpetuity paying $30 each month, beginning next month, if the annual interest rate is a constant effective 12.68% per year?
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