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Assume a firm's debt is risk-free, so that the cost of debt equals the risk-free rate, Rf Define BA as the firm's asset beta- that is, the systematic risk of the firm's assets. Define B E to be the beta of the firm's equity. Use the capital asset pricing model (CAPM) along with M&M Proposition II to show that BE= BAx(1+D/E), where D/E is the debt-equity ratio. Assume the tax rate is zero.
Please give the answer, doing step be step.
A stock has an annual return of 11 percent and a standard deviation of 44 percent. What is the smallest expected loss over the next year with a probability of 1 percent?
A bond has a $1,000 par value, 10 years to maturity, and a 8% annual coupon and sells for $980. What is its yield to maturity (YTM)? Round your answer to two decimal places.
The default risk and liquidity premiums for this company's bonds total 0.9 percent and are believed to be the same for all bonds issued by this company. If the average inflation rate is expected to be 5 percent for years 5, 6, and 7, what is the y..
A five-year project has an initial fixed asset investment of $360,000, an initial NWC investment of $40,000, and an annual OCF of −$39,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
The company has 10 million shares of common stock outstanding with a current price of $15.00 per share. The stock exhibits a constant growth rate of 8 percent. The last dividend (D0) was $.90. What is the Current Value?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $10 per share dividend 10 years from today ..
If you require a 9 percent return on bonds such as these with 5 years remaining until maturity and 8.2 percent on bonds such as these with 12 years remaining until maturity, how much would you pay for one of these bonds?
Estes Park Corp. pays a constant $8.60 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share pr..
Which of the following is the policy holder with the highest-risk tolerance?
When the bid price is below the ask price:
Barbarita’s Linens want to expand into the store next door to set up a Baby Supply Store. She needs $150,000 for the build out and new inventory of the project. Calculate the WACC. How much will the expansion cost in annual interest?
In this final project you will write a short concise stock recommendation report for a firm in which you would recommend as a buy.
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