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Expected and required rates of return
Assume that the risk-free rate is 3.5% and the market risk premium is 5%.
What is the required return for the overall stock market? Round your answer to two decimal places.
What is the required rate of return on a stock with a beta of 2? Round your answer to two decimal places.
Company sells 2,513 chairs a year at an average price per chair of $178. The carrying cost per unit is $30.53. The company orders 591 chairs at a time and has a fixed order cost of $44.9 per order. The chairs are sold out before they are restocked. W..
Suppose that the annual expected rates of inflation over each of the next five years are 5 percent, 6 percent, 9 percent, 13 percent, and 12 percent, respectively. What is the average expected rate of inflation over the 5-year period? Use the arithme..
Bobcat Company, US-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heaby equipment. Bobcat can invest at the rates given above or borrow at 2% per annum above those rates. Bobcat's ..
For the year ending December 31, 2008, General Electric's revenue was $182.52 billion. Assume that the revenue increases by 5% per year and that General Electric will (continuously) invest 10% of its revenues each year at an APR of 4.7% compounded co..
Should dividend policy be established independently of or in conjunction with capital structure policy? If capital structure is then changed might this affect dividend policy?
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.5 million, which will be depreciated straight-line to zero over its four-year life. what is the project’s aver..
According to the spending multiplier (for a small open economy), by how much will domestic product and income change? - What is the change in the country's imports?
Problems on Financial Management and Markets
Suppose that an analyst has noticed that the return on equity of the XYZ Company has declined from 2012 to 2013. (millions) 2013 2012 Sales $1,000 $900 Earnings before interest and taxes $400 $380 Interest expense $30 $30 Taxes $100 $90 Total assets ..
The current price of a non-dividend paying stock is $30. Use a two-step tree to value an American put option on the stock with a strike price of $32 that expires in 3 months. Each step is 1.5 months, the risk free rate is 8% per annum with continuous..
What is the required return for Dentrix Corporation? The risk-free rate is 2.6%, the risk premium is 7.3, the expected rate of inflation is 3.4% and the company can currently issue bonds at a YTM of 4.9%. All returns here are expressed as decimals, n..
Gekko & Company bought a new mash tun in 2014 for $385,000. The mash tun is expected to last for 12 years, but the asset falls into the MACRS 10-year class for depreciation purposes. Calculate the depreciation expense for the new mash tun that should..
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