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Consider a project with free cash flows in one year of $ 134,206 in a weak market or $ 162 150 in a strong market, with each outcome being equally likely. The initial investment required for the project is $ 85 000, and the project's unleveraged cost of capital is 17 %.The risk-free interest rate is 7%.
(Assume there are no taxes or distress costs.)
Suppose the initial $ 85 000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity in a weak market and a strong market at the end of year 1, and what is its initial market value of the levered equity according to MM?
The real risk-free rate is expected to remain at 3 percent. Inflation is expected to be 3 percent this year, and 4 percent next year. The maturity risk premium is estimated to be equal to 0.1%(t - 1), where t = the maturity of a bond (in years).
Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund?
Apart from improving liquidity and escaping from a segmented home market, why might emerging market MNEs further lower their cost of capital by listing and selling equity abroad?
Determine the appropriate weights to use in determining Circus' WACC and calculate Circus' cost of debt and cost of issuing new common equity.
What is the present value of this investment if 5 percent per year is the appropriate discount rate?
If Consolidated Power is priced at $50 with dividend, and its price falls to $46.50 when a dividend of $5 is paid, what is the implied marginal rate of personal taxes for its stockholders? Assume that the tax on capital gains for the marginal investo..
Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at time t=4.
What is the significance of each of the different types of value in the valuation process? Use examples to support your response?
STARZ INC pays a constant dividend of $16 for next 11 years then will stop paying dividends forever. If investors require a return of 14.5% on this stock, what is the value of the STARZ stock?
An individual has $15,000 invested in a stock with a beta of 0.3 and another $55,000 invested in a stock with a beta of 1.9. If these are the only two investments in her portfolio, what is her portfolio's beta?
If Jamesway takes $0.25 million in cash and pays off $0.25 million of current liabilities, what happens to its current and quick ratios? What happens to its real liquidity?
An independent consultant has determined -What is the annual sales figure you should use when evaluating this project?
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