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Question: Assume CAPM holds and you have the following information regarding three investment opportunities:
Project 1 has a project beta of 2.0 and you have estimated that the project's NPV using a cost of capital of 20% equals zero. Project 2 has a project beta of 1.5 and its NPV using a cost of capital of 10% equals zero. Lastly, project 3 has a project beta of 1.0 and its NPV equals zero using a cost of capital of 6%. None of these projects are ‘scale-enhancing' for the firm, i.e. they are different than the regular operations the firm currently maintains. As the head of the capital budgeting department you are trying to decide which projects should be accepted. The company has a levered equity beta of 0.8 and a debt-to-equity ratio of 0.5, which the company is planning to maintain for the foreseeable future. The company currently faces a 40% tax rate. Given that the expected return on the market portfolio is 8% and the risk-free rate is 3%, which projects would you accept and why? (Assume there is no capital rationing and the projects are going to be financed with 100% equity.)
Describe the type of budget (i.e., line item, program, performance). Discuss some of the highlights of the budget. Based on what you expected after reading Chapter Four, what was different about your budget?
Discuss the potentials and limitations of break-even analysis m evaluating alternative capital structures. What additional issues have to be addressed.
A mortgage of $100,000 has just been arranged for 25 years at an interest rate of 9.5 percent. It calls for equal payments made at year-end.
Summarize the role of management as it relates to finance in a corporation. In your post, address the following:
Why are internal and external communication strategies important to an organization's success? What might result if an organization has one but not the other?
what is the present value of a bond that pays 340 one year from now and 5340 two years from now at a constant interest
Based on what you've read so far, which brain functions do you think would computers be the best at imitating? What about the worst at imitating?
Evaluate Under Armour, Inc.'s, overall performance for 2014 in terms of cash flows. Be as specific as you can. What other information would be helpful
1. Assume you drink one coffee per day, 5 days a week. Assume coffee price is $4.00. That makes it $20 per week and $80 per month. Assume you can invest $80 per month in the stock market and assume you can earn 1 % per month on your stock investme..
rosman co. had three major business transactions during 2012.a reported at its fair value of 260000 merchandise
Compute the tax on the gain from the equipment sale and the cash flow after tax net salvage value.
Precision Manufacturing produces machine parts and has nearly 200 production employees and 50 employees in their front office with responsibilities ranging from data entry to marketing. Jackson Smith is the new Compensation Manager at Precision and h..
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