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Question: Assuming perfect capital markets:
Firm Xanc has a market beta for their equity of 1.2 and currently has a D/E ratio of 1.4. If you consider changing the D/E ratio to 1.6 how does this change the firm's equity beta (assume the beta of the debt is 0 when the D/E ratio is 1.4, but becomes 0.01 when the D/E ratio is 1.6)? Also figure out the new expected return of the equity if rm=.12 and rf=.04?
What is the profitability index for the set of cash flows if the relevant discount rate is 9 percent?
?investors should expect to be rewarded for only the systematic risk associated with an individual investment, systematic risk being measured by the beta.
Now suppose you have only 60000 you can invest, but you can borrow the other 40000 needed to make the risky investment given above. The loan for the 40000 will be a 7.8% APR installment loan, with monthly payments what is the expected EAR of the 6..
review the financial information in the chapter 9 mini case on pages 260 and 261 of you text. answer the following
What changes did the creation of the Department of Homeland Security bring about for the federal emergency management capacity?
How are short-term and long-term financing approaches used to optimize the acquisition of funds?
The heart of discounted cash flows analysis is the assumptions behind the numbers. Once the mechanics of the tool are mastered, then one needs to focus on the assumptions behind the numbers.
ABC expects sales of $21,040,000 this year. The cost of goods sold is expected to be $11,856,000 while selling, general and administrative (SGA) expenses.
Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds?
Draw a tree diagram illustrating the events, two cards are drawn in succession with replacement from a standard deck of 52 and its suit is observed. How many total branches exist in this tree diagram?
What sequencing will you use for your presentation? Prepare an outline for your instructor's feedback.
Use these duration values to calculate the expected change in the value of the loan and the liability for the predicted increase of 1.5 percent in interest rates.
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