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Finding Cost of Equity by using CAPM and NPV of the project with that rate.
1. A MNC can lend without risk at 3% and the return to the company is 9%. If a project has a β = 1.5 compared to the other investments of the company, what is the project's required rate of return?
2. An overseas project costs the equivalent of $1,000,000 in Argentine Pesos. Assume the F/X rate is hedged for the lifetime of the project and will be $0.50/Argentine Peso. The project will have a lifetime of four years and have no salvage value. The net cash flows will be constant and ARS 1,500,000 per year, except for the fourth year when it will be ARS 2,700,000. The cash flows take all costs into account, except for possible interest payments in Argentina (if the subsidiary borrows locally). The parent can convert this amount into the ARS and invest its own money or the subsidiary fund the entire project locally at 10% per year. The parent's discount rate for Argentina is 9%. How should the project be financed? Justify your answer numerically.
You are the beneficiary of a life insurance policy. The insurance firm informs you that you have two options for receiving the insurance proceeds.
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Describe a WACC and describe your reasoning within the context of the models discussed in class
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The $850 strike put premium is $25.45 and the $850 strike call is selling for $30.51. Calculate the breakeven index price for a strategy employing a short call and long put that expires in 6 months. Interest rates are 0.5% per month.
The projected net income from the project is $1,900, $1,800, $2,200, and $4,600 a year for the next four years, respectively. What is the average accounting return?
John has just begun investing, & one of his friends was mentioning how he could use short selling as an effective method to drive up his returns when market started to go down.
What is the value of a share of stock of HOV Inc. to an investor who requires a 12 percent rate of return if HOV's current dividend is $1.20? Assume earnings and dividends are expected to grow at a compound annual rate of 7 percent.
Unfortunately, any cases not sold by the end of the month are of no value, due to spoilage. How many cases of cheese should Jason manufacture each month?
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