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The market price of a security is $50. Its expected rate of return is 14%. The risk-free rate is 6% and the market risk premium is 8.5%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assuming that the stock is expected to pay a constant dividend in perpetuity.
Consider three risk free Eurobonds (which pay coupons annually). Their times to maturity, coupon rates and current market prices (based on a face value of$100) are as follows: Bond A 1 yr 9% $101.25; Bond B 2 yrs 8% 99.75; Bond C 3 yrs 7% $96.00.
Compute the price of the stock at the end of the fourth year (P4). Compute the anticipated value of the dividends for the next four years.
What is the amount to use as the annual sales figure when evaluating this project?
What are the advantages and disadvantages of a call provision from the viewpoints of both a firm and its bondholders? If you were the CEO of a firm, would you recommend a call provision for a new bond issue? Why or why not? Can you identify a recent ..
Kose, Inc., has a target debt–equity ratio of 1.50. Its WACC is 8.0 percent, and the tax rate is 35 percent. what is its pretax cost of debt?
Calculate the total value of the following portfolio of Financial Transmission Rights:
Consider firm that had been priced using 14.00 percent growth rate and 19.00 percent required rate. How much should the stock price change.
The estimate of how quickly a firm may grow by maintaining a constant mix of debt and equity is called:
Dave Inc. recently hired you as a consultant to handle project valuation. What is Dave’s current stock price per share?
In your role as production planner, you have experienced too many stock outs on one particular item. This item has 324 pints of demand during the lead time and a standard deviation during the lead time of 13.4 pints. Calculate the Safety Stock assumi..
Why is superfluous diversification unavoidable for a large institutional investor? What support does portfolio theory provide for the usefulness of the Beta concept? What do we mean when we say Beta is non-stationary? What is/are the value(s) of Beta..
Identify and explain those factors that may influence and effect a company's earnings per share.
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