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A company is considering two mutually exclusive projects, A and B. Project A has an NPV of $3,000,000 and Project B has an NPV of $4,000,000. What should the company do if the financial objective of the firm is to maximize the value of the firm?
a. Pursue only Project A.
b. Pursue only Project B.
c. Pursue both Project A and Project B.
d. Do not pursue either project.
Stock A has a beta of 1.50 and a standard deviation of return of 35%. Stock B has a beta of 3.25 and a standard deviation of return of 60%. Assume that you form a portfolio that is 40% invested in Stock A and 60% invested in Stock B. Using the inform..
Sam Sharp purchased 100 shares of Electric Lighting Inc. (ELI) one year ago for $60 per share, and he also received dividends of $5 per share since then. Now that ELI's stock price has increased to $64.6, Sam has decided to sell his holdings. What is..
An 7% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 7.5197%. What is the bond's price? Round your answer to the nearest cent. What is the bond's YTM?
Compare and contrast the yields and maturities for each of the securities and discuss which you would hold and why relative to interest rate risk.
Investors should expect to be compensated for bearing ____ risk, but they should not expect to be compensated for bearing ____ risk.
A project has an annual operating cash flow of $15,477. Initially, this 4-year project required $4,368 in net working capital, which is recoverable when the project ends. The firm also spent $10,000 on equipment to start the project. This equipment w..
The "efficient frontier" indicates:
Great Lakes Clinic reported net income for 2014 of $3.6 million on total revenues of $55 million. Depreciation expenses totaled $3 million. What were the total expenses? What were the total cash expenses? What was the clinic's cash flow?
A recent graduate was hired to lead a small public company. In an effort to increase the stock price of the company he proposed increasing the dividends of the company. He explained “since the stock price is basically based off of present value of al..
discuss the impact of each of the factors on your opinion. Offer some logic or current reference(s) to support your answer. Which factor do you think will have the biggest impact on interest rates?
If the current 180 day inter-bank Eurodollar rate is 15% (all rates are started on an annualized basis, and next period’s LIBOR is 13%, then a Eurocurrency loan priced at LIBOR plus 1% will cost. Suppose affiliate A sells goods worth $1 million month..
New Town Instruments is analyzing a proposed project. The company expects to sell 2,100 inits, + or - 4 percent. The expected variable cost per unit is $270 and the expected fixed costs are $548,000. Cost estimates are considered accurate within a pl..
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