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

  How they achieved operational excellence

Describe a present day organization and how they achieved operational excellence. Describe the tools, such as supply chain management, customer relationship management, and other enterprise applications, and how they help to achieve operational excel..

  Time-dependent and time-independent resources

What is the importance of distinguishing between time-dependent and time-independent resources? Does it impact the project schedules and the cost risk analysis? Explain and provide an example of the pros and cons as it applies to project costs.

  Long-term business success lies in firm ability

A key to long-term business success lies in a firm’s ability to offer value to customers through its product offerings. Identify and discuss the key sources of value at Colgate-Palmolive. How might these value-adding properties be communicated to cus..

  Participation of union in the manufacture

Modern Clothing, Inc., and National Denim Corporation use the mark "Made by Members of the U.S. Textile Workers Union" on the tags of their products to indicate the participation of the union in the manufacture. Modern and National are not in busi..

  What is the impact on the marginal cost of productions

What is the impact on the marginal cost of productions per unit when the average cost per unit rise above the minimum level?

  What is product configuration

What is product configuration? Provide an example of how this practice is used in the sale of commercial stereo equipment.

  Changes in the environmental bounds and managerial bounds

To design a “Zero Based Channel” what actions do you need to take as a channel designer? What impact it has on the positioning of the channel The choice of the Channel Structure Channel membership and their identity Exploring the idea of multiple cha..

  Liquidated damage amount stated in contract

Is the liquidated damage amount stated in the contract between Mica Co. and Pack Rat Storage valid, or is it an invalid penalty? How much in damages can Pack Rat Storage recover from Mica Co.?

  Recommendation report for an audience

If you were writing a recommendation report for an audience that doesn’t know you, would you use the direct approach, focusing on the recommendation, or the indirect approach, focusing on logic? Why?

  Price is the only element in the marketing mix

Price is the only element in the marketing mix that produces revenue all other elements represent costs. How do price decisions affect the other three P’s? Select a product that you regularly buy. How does price impact your purchase decision for this..

  What can management do to fight this discrimination and

there have been many media reports regarding the rise of discrimination against arab-americans in the united states

  About the organizational effectiveness

How does self-fulfilling prophecy help us with organizational effectiveness?

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