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Suppose you are given the following information: The beta of Company i, bi, is 1.1; the risk-free rate, rRF, is 7%; and the expected market premium, rM - rRF, is 6.5%. Assume that ai = 0.0.
a. Use the Security Market Line (SML) of the CAPM to find the required return for this company.
b. Because your company is smaller than average and more successful than average (that is, it has a low book-to-market ratio), you think the Fama-French threefactor model might be more appropriate than the CAPM. You estimate the additional coefficients from the Fama-French three-factor model: The coefficient for the size effect, ci, is 0.7, and the coefficient for the book-to-market effect, di, is -0.3. If the expected value of the size factor is 5% and the expected value of the book-to-market factor is 4%, what is the required return using the Fama-French three-factor model?
In order to evaluate risk, management may set qualitative risk classes. Rank these four projects from the least to the most risky, and explain the risks involved in each project.
Complete ratio analysis for the last fiscal year using at least two ratios from each of the following categories: Liquidity, Financial leverage, Asset management, Profitability and Market value.
What is the NPV of all cash flows to Ocean Carriers if it decides to sell the carrier when it is 15 years old?
Determine the cost of capital for each of the financing options being considered: debt, preferred shares and new common shares. Discuss in qualitative terms, the effects of issuing preferred shares or new common shares.
Explain a condition where values have been held out of equilibrium due to government intervention in the market the obvious ones discussed in the text are rent control and agricultural subsidies.
What are the competitive forces behind the industry's structure? How does industry competition affect the margins of the industry and the company? What is COH's business strategy?
computation of economic order quantity of books for college.the bookstore at smith college purchases sport shirts with
1. whats the future value of 1200 after 5 years if the appropriate interest rate is 6 compounded monthly?a. 1537.69b.
Determine the value of a typical corporate bond. Thus, in this case assignment, you will work through a variety of time value of money problems to illustrate the idea to the CEO.
Spencer Corporation sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable yearly on January 1.
What kind of option position did the insurance companies have - What is the underlying asset for the options in this real-life example?
Calculate the present value of the salary differential for completing the certification program. Subtract the cost of the program to get the NPV of undertaking the certification program - Calculate the present value of the salary differential for c..
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