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A mutual fund manager has a $20 million portfolio with a beta of 1.75. The risk-free rate is 3.00%, and the market risk premium is 4.0%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 13%. What should be the average beta of the new stocks added to the portfolio? Do not round intermediate calculations. Round your answer to two decimal places. Enter a negative answer with a minus sign.
How many of the coupon bonds would you need to issue to raise the $45 million? Calculate the firm’s aftertax cash outflows for the first year for each bond.
Briefly explain why you are using the computational method chosen. (Hint: you will need to decide to use the APV or WACC formula.
The firm can issue up to $225,000 worth of debt at a before-tax cost of 10%. Determine the marginal cost of capital schedule.
Friendly’s Quick Loans, Inc., offers you “eight for ten or I knock on your door.” This means you get $8.00 today and repay $10.00 when you get your paycheck in one week (or else). If you were brave enough to ask, what APR would Friendly’s say you wer..
Pricing a Foreign Target. Alaska Inc. would like to acquire Estoya Corp., which is located in Peru. In initial negotiations, Estoya has asked for a purchase price of 1 billion Peruvian new sol. If Alaska completes the purchase, it would keep Estoya’s..
Why do you think the bondholders wanted to block this transaction? What arguments can you make for and against the bondholders' case?
What is the value of a one-month European call option with a strike price of $ 29?
What would you expect to happen to the risk-free rate and equity returns when a segmented country opens its capital markets to foreign investment?
The present value of an ordinary annuity with interest at 18% amounted to $50,000. If this was an annuity due, what would be the value of an annuity due?
Do you think that Ducati's decision to sell exclusively through the Internet its MH900e motorcycle model was a risky decision or a safe bet? Explain.
Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return. In the 90-day forward market, 1 Br..
A zero-coupon bond with a par value of $1,000.00 has a current market value of $548.00. If the bond has 7 years to maturtiy, what is its yield to maturity?
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