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1. Explain what is working capital and sunk cost?
2. A bank has assets with an average duration of 3 years and liabilities with an average duration of 1.5 years. Should it be an interest-rate swap buyer (and make fixed-rate payments) or seller (and make variable-rate payments)? Explain.
3. The company has the following free cash flows for the next 4 years FCF1=-100, FCF2=-55, FCF3=-40, FCF4=150, after year 4, the growth rate of the FCF will be 10%, and the WACC=15%, then what the firm value should be?
Compute earnings per share and the P/E ratio for 20X2. What is the firm’s projected free cash flow for the year 20X1?
BU340- What is the expected return of each asset? What is the variance of each asset? What is the standard deviation of each asset?
A firm has a beta of 0.2 and an asset beta of 1.9. the debt-to-equity ratio is 75%. Assume the company follows a constant debt-to-equity ratio policy and that the tax rate is 32%, what is the levered equity beta?
A variable annuity contract can be defined as a contract in which the insurance company varies the annuity payments based on the net income of the insurance company. If the net income of the insurance company increases, then the annuity payments asso..
Assume tax rate is 35%. Debt: $10M face value, current price $10.8M, 6.4% coupon rate, 25 years to maturity, semiannual coupon payment.
The market risk premium is 8% and the risk-free rate is 3%. What is the appropriate discount rate to use for your division’s assets/projects?
Identify if there is any arbitrage opportunity and state what to do to earn an arbitrage profit
Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 15% per year. What price do you forecast for the stock one year from now? What is the cost of capital on the stock?
Find information about Power of Diversification.
Assuming typical discount rates of less than 30 percent, rank the following from highest to lowest present value, and then briefly explain each one.
The stock price volatility is 25%, the 5-year risk-free rate is 5%, and the company does not pay dividends. Estimate the cost to the company of the employee stock option issue.
You are negotiating to make a 7-year loan of $27,500 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end..
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