What is the required rate of return on the sanding machine

Reference no: EM13267757

Initially Firm A has a beta of 1.3, when Rrf= 7 percent and Rm=12 percent. The firm now sells 10 percent of its assets (beta=1.2) and uses the proceeds to purchase another asset, a sanding machine, with a beta of .7.

a) What is the required rate of return on the sanding machine?

b) What is the new overall required rate of return for Firm A?

Reference no: EM13267757

Questions Cloud

What is ex-dividend price of a share in a perfect capital : Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding with a current market price of $15 per share. Natsamâ's board has decided to payout this cash as a one-time dividend.

Use of cultural-economic and political and global turnings : How would the use of cultural, economic and political turnings enhance your understanding of how global turnings are impacting your ability to make sense of organizations in which you work, serve, and take an interest? Provide details and support for..

Discuss rationale behind the principle of increasing cost : Microeconomics BACC107, In the study of Microeconomic, the question "How to produce" is one of the basic economic problems (BEPs). Using an example, discuss this concept. In your discussion, you must also discuss the rationale behind the principle o..

What is the lifetime according to a hypothetical person : Suppose a pion is moving at a speed of 0.986c, and an observer who is stationary in a laboratory measures the pion's lifetime to be2.7 × 10-8 s. What is the lifetime according to a hypothetical person who is riding along with the pion

What is the required rate of return on the sanding machine : Initially Firm A has a beta of 1.3, when Rrf= 7 percent and Rm=12 percent. The firm now sells 10 percent of its assets (beta=1.2) and uses the proceeds to purchase another asset, a sanding machine, with a beta of .7.

What is the number of shares under each plan : Ace had 10 million in assets. It is consider a 40 percent debt/asset ratio vs. its current 20 percent debt/asset ratio. Debt arriews interest charges of 12 percent and shares sell for $20 per share.

Advanced statistical analyses to completely explore : Share your thoughts about using more advanced statistical analyses to completely explore your study's findings. Which statistics must be included in a research analysis? How about Chi-squares, t-tests, and ANOVAs?

Who are the remaining general creditors : Who are the remaining general creditors? How much will each receive from distribution before surodination adjustments? What is the effect of adjusting for subordination?

Global encounters-achievements and exploitation : Explain at least two (2) possible reasons for the differences between the results of exploration and trade by the Chinese and by the European states. Consider the reach of the Chinese Treasure Fleet and the global empires that Spain and Portugal esta..

User Account

All Pages