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A stock has a beta of 1.2 and the standard deviation of its returns is 25%. The market risk premium is 5% and the risk-free rate is 4%. SHOW ALL WORK
a. What is the expected return for the stock?
b. What are the expected return and standard deviation for a portfolio that is equally invested in the stock and the risk-free asset?
c. A financial analyst forecasts a return of 12% for the stock. Would you buy it? Why or why not?
What is the future value of $12 deposited today in 5 years when earning 6% simple rate of interest?
A state-sponsored Forest Management Bureau is evaluating alternative routes for a new road into a ormerly inaccessible region. Three mutually exclusive plans for routing the road provide different benefits, indicated in Table P10-19. The roads are as..
A company's CFO wants to maintain a target debt-to-equity ratio of 1/4. If the WACC is 18.6%, and the pretax cost of debt is 9.4%, what is the cost of common equity assuming a tax rate of 34%? A. 19.90% B. 20.90% C. 21.70% D. 22.73%
What would be the breakeven point if the price of the pump is $250 and the variable cost ratio is 50% of the price. The fixed cost would be about $400.000 What is the breakeven point of operations?
legal and ethical considerations in marketing product safety and intellectual propertyreview the pharmacarecompcare
How is the opportunity cost concept used in the capital budgeting process? What are the potential tax consequences of selling an old asset in an asset replacement investment decision?
You have just made a $1,500 contribution to your individual retirement account. Assume you earn a rate of return of 8.7 percent and make no additional contributions. How much more will your account be worth when you retire in 25 years than it would b..
Discuss the role of a third party intermediary in an interest rate swap agreement. Describe the risks assumed by the intermediary. How does the intermediary potentially profit from this activity?
In general, the cost of debt capital is lower than the cost of equity capital. For this reason, it might be expected that firms with high debt ratios would have a lower weighted average cost of capital. Explain at least one reason why this is not the..
A partial balance sheet and income statement for King Corporation follow: The trade receivables at December 31, 2010, were $280,000, net of an allowance of $8,000, for a gross receivables figure of $288,000. The inventory at December 31, 2010, was $5..
Suppose Ford Motor Co. sold an issue of bonds with a 10-year maturity, $1,000 par value, and 10% coupon rate. Two years after the bonds were issued, the going rate of interest on similar bonds fell to 6%. At what price would the bonds sell? Instead o..
A local firm has debt worth $250,000, with a yield of 9%, and equity worth $400,000. It is growing at a 6% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 11%. Under the MM extension with growth, what is the value o..
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