Capital for an average-risk whispering pines investment

Assignment Help Operation Management
Reference no: EM131173248

Does any have any advice on how to answer the following questions?

Whispering Pines, Inc. is currently all-equity financed. The expected rate of return on its unlevered shares is 12%. The beta of the market portfolio is 1.0, the risk-free rate of return is 3%, and the market risk premium is 6%. Given this information, answer the questions below.

What is the opportunity cost of capital for an average-risk Whispering Pines investment?

Are the assets of Whispering Pines more, less, or as risky as the market to a diversified investor? Briefly justify your response.

Suppose the company issues debt, repurchases shares, and moves to a 30% debt-to-value ratio (D/V=.3). What will the company's new weighted-average cost of capital be at the new capital structure? The borrowing rate is 7.5% and the tax rate is 35%.

Reference no: EM131173248

Questions Cloud

What is the maximum number of clock pulses : What is the maximum number of clock pulses needed to return a 4-bit Johnson counter to its original state?- Which of the following does a UART contain?
Despite its political popularity : Despite its political popularity, the overwhelming majority of economists are not in favor of a Constitutional amendment that requires the federal government’s budget to be balanced every year. Utilizing the concepts from this weeks' readings, explai..
What is the days sales outstanding : a. What is the days sales outstanding? b. What is the average amount of receivables? c. What is the Dollar amount of the discounts?
Monopolies and perfectly competitive firms : Under what conditions will monopolies and perfectly competitive firms make losses, even when they are producing the profit-maximizing output? Under what conditions will they both stay in business and continue to produce in the short run, even with ma..
Capital for an average-risk whispering pines investment : Whispering Pines, Inc. is currently all-equity financed. The expected rate of return on its unlevered shares is 12%. The beta of the market portfolio is 1.0, the risk-free rate of return is 3%, and the market risk premium is 6%. Given this informa..
Foundations for deliberative democracy-civic participation : Summarize the foundations for deliberative democracy and civic participation in the United States. Define the contemporary level of democratic institutionalism and civic engagement in the United States: is it high or low, active or passive? Is it a l..
Worth of excavation equipment : Riverton Mining plans to purchase or lease $435,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over five years, after which it will be worthless. If leased, the annual lease payments wil..
Suppose the components of spending in an economy : Suppose the components of spending in an economy are as follows: What is the equilibrium level of income (Y)? (Hint: Y=C+I+X-M) What is the trade balance (X-M) at this equilibrium ? Suppose exports increase by 100. What is the new equilibrium level o..
Explain fdic deposit insurance value as an option : Explain FDIC deposit insurance's value as an option. and Why are options almost always more valuable than a forward contract if all pertinent details were exactly the same (such as asset, expiration date, quantity involved, and quality of the asse..

Reviews

Write a Review

Operation Management Questions & Answers

  Book review - the goal

Operations Management is about a book review. Title of the book is "Goal". This book has been written by Dr. Eliyahu Goldartt. The book has been appreciated by many as one of those books which offers an insight into the operations and strategic capac..

  Operational plan in hospitality enterprise

Operational plan pertaining to a hospitality enterprise is given in detail in the solution. The operational plan is an important plan or preparation which gives guidelines regarding the role and responsibilities of each and every operation at all lev..

  Managing operations and information

Recognise the importance of a strategic approach to the development and deployment of organisational information systems. Demonstrate an understanding of the importance of databases and their integration to the organisation's overall information mana..

  A make-or-buy analysis

An analysis of the holding costs, including the appropriate annual holding cost rate.

  Evolution and contributor of operations management

Briefly explain Evolution and contributor of Operations management.

  Functions and responsibilities of an operations manager

A number of drivers of change have transformed the roles, functions and responsibilities of an operations manager over recent years. These drivers have not only been based on technological innovations but also on the need for organisations to develop..

  Compute the optimal order quantity

Compute the Optimal Order quantity of DVD players. Determine the appropriate reorder point.

  Relationship to operations practice in the organisation

Evaluate problems in operations and identify approaches to overcoming them. Critically evaluate operating plans and identify areas for improvement. Justify, implement and evaluate changes to operations in line with modern approaches.

  A make or buy analysis

Develop a report for Figi Fabricating that will address the question of whether the company should continue to purchase the part from the supplier or begin to produce the part itself.

  Prepare a staffing plan

Prepare a staffing plan showing the change of your unit from medical/surgical staffing to oncology staffing.

  Leadership styles in different organizations

Ccompare the effectiveness of different leadership styles in different organizations

  Risk management tools and models

Be able to understand the concept of risk, roles and responsibilities for risk management and risk management tools and models.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd