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1.Suppose the market risk premium is 5% and the risk-free interest rate is 4%. Using the data in Table 10.6, calculate the expected return of investing in
a. Starbucks’ stock.
b. Hershey’s stock.
c. Autodesk’s stock.
2.Given the results to Problem 33, why don’t all investors hold Autodesk’s stock rather than Hershey’s stock?
3.Suppose the market risk premium is 6.5% and the risk-free interest rate is 5%. Calculate the cost of capital of investing in a project with a beta of 1.2.
4.State whether each of the following is inconsistent with an efficient capital market, the CAPM, or both:
a. A security with only diversifiable risk has an expected return that exceeds the risk-free interest rate.
b. A security with a beta of 1 had a return last year of 15% when the market had a return of 9%.
c. Small stocks with a beta of 1.5 tend to have higher returns on average than large stocks with a beta of 1.5.
The costs of maintaining current assets, including the opportunity cost of capital is known as, Expenses should be recorded in the period in which they are used up.
he tax rate is 34 percent, what is the annual OCF for the project?
A guy buys a car for $21,000 and finances it with a fiveyear, 7% APR with monthly payments and compounding. How much of histhird payment goes toward repaying principal?
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An investor has two bonds in his or her portfolio, Bond C and Z. Each matures in four years, has a face value of $1,000, and has a yield to maturity of 9.6%.
CEO of Acme, Inc. located in the United States. You use the discounted payback period method and accept all projects that payback in three years. You are considering a project that will cost $5,500,000 and will produce one cash flow that occur..
A $1000 value convertible bond with conversion price of $50. It sells for $1,120 despite the fact bond's coupon ate determine the convertible bond's conversion premium?
Given the prices below, is it more profitable to borrow money directly or to create an equivalent synthetic position using stocks and stock index futures? Use tables showing the payoffs to compare the two.
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penguin pucks inc. has current assets of 7000 net fixed assets of 25800 current liabilities of 6600 and long-term
Based on a discounted cash-flow analysis, should the investment to be undertaken?
Is Porter's five-factor model the best framework to use to evaluate the competitive environment of an industry? Why or why not?
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