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You are discussing your 401(k) with Dan Ervin when he mentions that Sarah Brown, a representative from Bledsoe Financial Services, is visiting East Coast Yachts today. You decide that you should meet with Sarah, so Dan sets up an appointment for you later in the day. When you sit down with Sarah, she discusses the various investment options available in the company’s 401(k) account. You mention to Sarah that you researched East Coast Yachts before you accepted your new job. You are confident in management’s ability to lead the company. Analysis of the company has led to your belief that the company is growing and will achieve a greater market share in the future. You also feel you should support your employer. Given these considerations, along with the fact that you are a conservative investor, you are leaning toward investing 100 percent of your 401(k) account in East Coast Yachts. Assume the risk-free rate is the historical average risk-free rate (in Chapter 10). The correlation between the bond fund and the large-cap stock fund is .16. (Note: The spreadsheet graphing and “Solver” functions may assist you in answering the following questions.)
After examining the opportunity set, you notice that you can invest in a portfolio consisting of the bond fund and the large-cap stock fund that will have exactly the same standard deviation as the bond fund. This portfolio will also have a greater expected return. What are the portfolio weights and expected return of this portfolio?
The firm was required to spend $15,250 to buy new fixed assets and to invest $6,850 in net operating working capital. What was the firm's free cash flow?
Based on the following information, should you buy or lease this car?Links to an external site.
The offer price is $38 a share and the underwriter's spread is 8 percent. The administrative costs are estimated at $865,000. How much will Global Traders receive from this stock offering as net proceeds assuming the issue is completely sold?
Suppose a stock paid a $5 dollar dividend today. The discount rate is 9 percent. What is the price of the stock today?
Compute the fair price of the following perpetual bond. Its first interest, $120, will be paid 15 years from now and will be adjusted upward by 3% every year to compensate for the risk of inflation. Investors require 8% return on the bond.
The expansion project at Zingerman requires an initial investment of $10,000,000. The target D/E ratio is 3/2 for the firm. Flotation costs are 10% for equity and 4% for debt. How much funds have to be raised for this project taking into account the ..
Review the definitions of transaction exposure and economic exposure (no need to provide the definition). How are they different? Please provide an example of a transaction or economic exposure.
Note that even though your answer will represent a cash outflow for the payment of dividends,
What will be your rate of return if the price of XYZ stock goes up by 8% during the next year? The stock currently pays no dividends.
Parcel Corporation Company plans $10 dividend next year (100% of earnings). Instead, company plows back 30% of earnings (i. e plowback ratio Is 30% and payout ratio is 1-30% = 70% and dividend payment is $7 = 70%* 10) at firm's current return on equi..
What is the operating leverage phenomenon and what causes it?
A 12 year bond has 6 years left to maturity and its coupon rate is 8%, paid semi-annually. Consider each of the following situations separately. What is the bond’s current price if the market rate is 4.5%? If the required return on this bond (the cur..
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