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You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 18 percent, –14 percent, 20 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 4.4 percent.
What was the average real risk-free rate over this time period?
What was the average real risk premium?
Medical Devices just paid its annual regular cash dividend of $1.90 a share, along with a special dividend of $0.60 a share. The company follows a policy of increasing its dividend by 3 percent annually. Which one of the following is the best estimat..
Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant data estimates.
Shi Importers’ balance sheet shows $300 million in debt, $50 million in preferred stock, and $650 million in total common equity, which is its target capital structure. Shi’s tax rate is 40%, cost of debt is 6%, cost of preferred stock is 5.8% and co..
Two stocks each pay a $1 dividend that is growing annually at 8 percent. Stock A's beta = 1.3; stock B's beta = 0.8. If Treasury bills yield 9 percent and you expect the market to rise by 13 percent, what is your risk-adjusted required return for eac..
An investor is forming a portfolio by investing $55,000 in stock A that has a beta of 1.33, and $75,000 in stock B that has a beta of 0.95. The market risk premium is equal to 6.30% and Treasury bonds have a yield of 4.25%. What is the required rate ..
Better Care Clinic (Breakeven Analysis) Fairbanks Memorial Hospital, an acute care hospital with 300 beds and 160 staff physicians, is one of 75 hospitals owned and operated by Health Services of America, a for-profit, publicly owned company. the per..
Your stock portfolio is worth $10M with a beta of 1.1. The spot price of S&P 500 is 950. Each S&P 500 contract is for $250 per index points. To protect against the market decline. How many futures contract should you need? Would you go short or long ..
A firm has had the indicated earnings per share over the last three years: If the firm's dividend policy was based on a constant payout ratio of 50 percent, determine the annual dividend for each year. How does asymmetric information affect the firm’..
Name a firm that mitigated foreign exchange risk through methods such as currency swaps, currency futures, forward transactions, etc. What method was used and what was the result? If the firm has used a different method, would the result have been th..
A stock is trading at $75 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 15% (assume the market is in ..
Fast Cash Limited has the following information and a tax rate of 30 percent. . Debt 700, 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 95 percent of par, currently selling for $115 per share Market 7 percent..
The market value of the equity of Thompson, Inc., is $307,000. The balance sheet shows $22,000 in cash and $200,000 in debt, while the income statement has EBIT of $97,000, and a total of $136,000 depreciation and amortization. What is the enterprise..
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