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Suppose that Trump goes through with his promise and builds a wall between the U.S. and Mexico for a cost of 300. Suppose also your firm is considering a major capital project and the IRR (internal rate of return) on this project is 15%. Your firm’s cost of capital is (r+6%) where the 6% is the appropriate risk premium for your firm.
QUESTIONS
What is the new equilibrium r in the model after the 300 expenditure for the wall? Show how you arrived at your answer.
Should your firm undertake this capital project? Why or why not?
Which of the following statements is true about the constant growth model?
organisations behaviour is guided by financial data. in the short term such data will help determine operational
Required rate of return Assume that the risk-free rate is 6% and the expected return on the market is 11%. What is the required rate of return on a stock with a beta of 1.1? Round your answer to two decimal places.
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Smaltz Enterprises is currently involved in its annual review of the firm's cost of capital. Historically, the firm has relied on the CAPM to estimate its cost of equity capital. The firm estimates that its equity beta is 1.25, and the yiled to matur..
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Cameron has a two-asset portfolio with an expected return of 13.80%. The weight of the two stocks is 30% and 70%. The first stock has an expected return of 17%, what is the expected return of the second stock?
Calculate and explain the theoretical ex-rights price per share;- the net cash raised;- the value of the rights.- Is the underwriting of rights issues an unnecessary expense?
Suppose the interest rate for a 1-year Treasury bond is 10% and a 1-year BB-rated corporate bond is 15.8%. What is the probability of default as perceived by the market?
Sunn's Co.'s bonds, maturing in 15 years, pay 13 percent interest on a $1000 face value. However, interest is paid semiannually. if your required rate of return is 7 percent, what is the value of the bond? How would your answer change if the interest..
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