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St. Louis Brewing Co. has an unlevered beta of 1.1 , however, they want to add debt until their debt-to-equity ratio is 2.9 . Currently, they have a tax rate of 20%. Calculate the new levered beta.
Which of the following would tend to reduce the weighted average cost of capital for a firm? Margo Lawrence is employed full-time as a paralegal, but on evenings and weekends, she bakes wedding cakes.
If you __________, then you may be forced to buy the underlying stock. Lower volatility results in __________ Put Option prices and ______ Call Option Prices.
Etonic Inc. is considering an investment of $373,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $253,000 and $78,000, respectively. Both rev..
Which of the two companies below is more likely to employ higher financial leverage? Explain from the perspective of advantages and disadvantages of debt financing. A R&D - intensive company. A mature company with low growth.
If Security X has an expected return of 2% and a risk of 10%, Security Y has an expected return of 5% and a risk of 25%, and the risk of an equally weighted portfolio of the two is 15%, then which of the following statements is correct for a risk-ave..
Suppose the risk-free rate is 3.5 percent and the market portfolio has an expected return of 10.2 percent. The market portfolio has a variance of .0312. Portfolio Z has a correlation coefficient with the market of .21 and a variance of .3215 Accordin..
Prepare a december 31 balance sheet from the following information: million investment securities $130 Demand deposits 170 Federal funds purchased 105 Total (gross) loans 644 Cash and due from banks 98 Savings and time deposits 555 Net loans 636 Bank..
To help distinguish opportunity costs and incremental cash flows, consider these four examples: Which of these are opportunity costs? Which are incremental cash flows?
You buy a straddle, which means you purchase a put and a call with the same strike price. The put price is $1.20 and the call price is $3.50. Assume the strike price is $30. a. What are the expiration date profits to this position for stock prices of..
A stock has a beta of 1.18, the expected return on the market is 11.2 percent, and the risk-free rate is 4.85 percent.
What is the cost of common equity?
Suppose you are trying to find the present value of two different cash flows using the same interest rate for each cash flow. One is $2,000 twenty years from now, the other a $1,600 flow fourteen years from now. Which of the following is true about t..
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