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Suppose a firm projects cash flows of $2.5 million, $3 million, and $4 million for years 1, 2, and 3, respectively, on an initial investment in Ecuador of $22 million. The firm projects a perpetuity of $5 million in years 4 and beyond. If the required return on this investment is 17%, how large does the probability of expropriation in year 5 have to be before the investment has a negative NPV? Expected compensation in the event of expropriation is $3 million.
What is the duration of a two-year bond that pays an annual coupon of 11.6 percent and has a current yield to maturity of 13.6 percent? Use $1,000 as the face value. What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent? U..
Laurel Enterprises expects earnings next year of $4.44 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost of capital is 9%, which is also its expected return on new investment. hat do you estimate the firm's curr..
The trustee is the person who creates a trust. A divorce does not necessarily revoke an entire will.
Calculate the present value of the following “Perpetuities”. Assume r=20%. A “Perpetuity” that only pays you in even years and the payment each year is $100. That is, the you get $100 on year 2, year 4 … and $0 on year 1, year 3… .
Rowan Company currently has a net profit margin of 8.3 percent, debt ratio of 43 percent, total assets of $4,346,703, sales of $5,724,548, and a dividend payout ratio of 55 percent. The firm’s management desires a sustainable growth rate (SGR) of 13 ..
You own $18,615 of Human Genome stock that has an assumed beta of 3.56. You also own $13,870 of Frozen Food Express (assumed beta = 1.69) and $4,015 of Molecular Devices (assumed beta = 0.54). What is the beta of your portfolio?
Company knows that it is due to receive certain amount of foreign currency in four months. What position is appropriate for hedging inflow of foreign currency?
Based on Black-Litterman optimization, you obtained an optimal portfolio which invests 70% and 40% funds in stocks A and B and short-sells 10 percent of stock C. However, you are only 80% confident about your opinion. When the market capitalization o..
You find a certain stock that had returns of 4 percent, -5 percent, -15 percent, and 16 percent for four of the last five years. The average return of the stock for the past year-year period was 8 percent. What is the standard deviation of the stock'..
When valuing company and you find that your estimated value of the firm differs substantially from the market value of the firm,
Consider a European call on a stock when there are ex-dividend dates in four months and seven months. Calculate the price of the call.
what is Widget’s weighted average cost of capital?
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