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A share of stock with a beta of 0.70 now sells for $60. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 5%, and the market risk premium is 8%.
a. Suppose investors believe the stock will sell for $62 at year-end. Is the stock a good or bad buy? What will investors do?
b. At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $91 per unit, and the variable cost is $58 per unit. If the required rate of return is 11% per year, what ..
When life insurance companies seek long term investments, they are focusing on________.
What will be the monthly payment? How much of the first payment will be interest, and how much will be principal?
A borrower is considering a 1-year adjustable rate mortgage of $250,000 that starts at 2.5%, 30 year amortization. The margin is 2.25%. The annual change caps are 2% per year. The current index is 1.25%. The life cap is 6% over the start rate. What i..
what the par/face (FV) value will be, coupon payment (PMT) and length/time (N)
Brianna receives an annuity which provides 20 annual payments at the end of each year. The first payment is $1000 and each subsequent payment is 5% higher the previous one. Find the present value of this annuity if the effective annual interest rate ..
Assume that the contract value had not increased or decreased because of investment performance. What was the surrender charge Sophia had to pay?
Jensen's has expected earnings before interest and taxes of $6,200. Its unlevered cost of capital is 14 percent and its tax rate is 34 percent. The firm has debt with both a book and a face value of $2,500. This debt has a 9 percent coupon and pays i..
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a resid..
Lenders probably have the most interest in which one of the following sets of ratios? Return on assets and profit margin. Long-term debt and times interest earned. Price-earnings and debt-equity. Market-to-book and times interest earned.
What are the risks in a FRA if you are the buyer? Answer the following questions: a. When will the buyer of a five year cap on three- month LIBOR with a 1 percent strike rate expect to receive cash? What is the cap premium? b. When will the buyer of ..
the 2010 balance sheet of marias tennis shop inc. showed long-term debt of 3.1 million and the 2011 balance sheet
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