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1. You are a CEO of a moped company. You are deciding whether to build a factory in Italy. The plant will cost $50 million dollars today and be straight-line depreciated to its market value of $0 in 10 years. You expect the incremental cash flows to be $2 million in year 1 and $8 million in years 2 through 10. Assume that CAPM holds. The beta of your project is 0.8. The expected market return is 14% and the risk-free rate is 4%. What is the appropriate discount rate for the project?
a. 10%
b.11%
c. 12%
d. 13%
2. Firms A and B have the same Return on Assets. If Firm A has a higher Return on Equity than Firm B, which of the following is true?
Firm A has a higher debt ratio than firm B
Firm A has a lower debt ratio than firm B
Firm A has a higher net profit margin than firm B
Firm A has a higher gross profit margin than firm B
Suppose that LilyMac Photography has annual sales of $240,000, cost of goods sold of $175,000, average inventories of $5,500, average accounts receivable of $27,000, and an average accounts payable balance of $18,200. Assuming that all of LilyMac’s s..
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Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 6.2% r2 = 6.7% r3 = 7.4% r4 = 8.2% What are the following forward rates, where f1, k refers to a forward rate for the period beginning in one year and ..
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Calculate the standard deviation of the portfolio described in the table below. Assume that the correlation between the two assets is 25%
Please circle ALL of the correct statements below about foreign exchange forward and futures contracts.
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