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Suppose that assets are priced according to the Fama-French 3-factor model. Consider three small firms: A, B and C. Assume that their risk characteristics are the same but otherwise the three firms are unrelated. In particular, Factor-betas A B C βM 1/2 1/2 1/2βHML -1/2 -1/2 -1/2 βSMB 1 1 1Risk premia on the market, HML and SMB factors are 6%, 7% and 5% respectively.
(a) Suppose that the three firms decide to merge and each will be operated as an independentunit of the merged company. What are risk characteristics of the merged company and its risk premium?
(b) Are the dynamics of the merged company consistent with the prediction of the FF model?
The Mansford Co. Evaluates projects using payback. Suppose that a project requiring an outlay of $816 dollars is followed by the following inflows for the next
Dividends are expected to continue growing at a rate of 4.9% per year into the indefinite future. If the firm's tax rate is 30%, what discount rate should you use to evaluate the equipment purchase. Ranch Manufacturing's WACC is.
What are the different types of environmental variables and its importance?
Wayne Industries has bonds on the market making annual payments, with 12 years to maturity, a par value of $1,000, and selling for $1,264.00.
If a piece of property is assessed at $12,625 under a fractional practice of 65 percent, what is the sale value of the property?
In 3 years, the machine you purchase for the project can be sold for $50,000. The firm has the marginal tax rate of 34%. What is the terminal value of the proje
If conditions are excellent, the NPV of the project is projected to be $3,000; under fair conditions, the NPV is projected at $950; and under unfavorable conditions, the NPV is projected at ($600). The probabilities of these three conditions are ..
Is it easier for a central bank to be independent in a high-income country or in a low-income country? What implications does your answer have for what the average inflation rate is likely to be in high-income countries as opposed to low-income co..
An apartment building can be well represented as producing net rent of $10/SF annually in arrears, with expected annual growth over the long run of negative.
oconnell amp co. expects its ebit to be 74000 every year forever. the firm can borrow at 7 percent. oconnell currently
The returns for IMB over the last 3 years are given below.
Ringon Simpat JV is a joint venture headquartered in Kuala Lumpur between Ringon Pharma and Simpat Research, both US based companies.
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