What is the risk premium on small cap index

Assignment Help Financial Management
Reference no: EM132000799

1. Bruin Inc. is investing in a new project with similar risk profile as its other projects. Considering that the cost of equity is 11.7%, the cost of debt is 6.6% and the company's tax rate is  35%, what is the appropriate discount rate for the project if the debt/equity ratio is 0.5?

a. 9.1500%

b. 8.3000%

c. 9.2300%

d. 7.9950%

e. 6.7600%

2. What is the risk premium on a small cap index with an expected return of 13.6% and 25.4% volatility?

Assume the risk free rate is 4.6%

a. 4.60%

b. 11.10%

c. 9.00%

d. 13.60%

e. 18.20%

Reference no: EM132000799

Questions Cloud

How many new shares will be issued and at what? price : How many new shares will be issued and at what? price? What will happen to the price of your shares of BAD? Co.?
Current share price according to dividend growth model : If the required rate of return on this stock is 15 percent, what is the current share price according to the dividend growth model?
Example of nondiversifiable risk : Which one of the following is an example of a nondiversifiable risk?
What is the current price of the bond : A $1000 PAR value bond with 5 years remaining until maturity and an annual coupon rate of 7% is selling today to yield 8%. What is the current price of the bond
What is the risk premium on small cap index : What is the risk premium on a small cap index with an expected return of 13.6% and 25.4% volatility?
What is standard deviation of your portfolio : Considering that your portfolio is composed of 35% of Security A and 65% of Security B, what is the standard deviation of your portfolio?
What will you pay for share today : Bruins R Us is a mature toy manufacturing firm. The company just paid a dividend of $9.53, but management expects to reduce the payout by 5% per year,
Using forward hedge or money market hedge : Would it be better off using forward hedge or a money market hedge?
What would be the value of the product line : What would be the value of the product line at that time (i.e. one year from now) in such a case?

Reviews

Write a Review

Financial Management Questions & Answers

  How to calculate ebitda-ebit and net margin

How to calculate EBITDA, EBIT and Net Margin

  What is the estimated stock value using the ddm model

Avista Utility paid out $1.37 dividend per share last year. What’s the estimated stock value using the DDM model?

  Overcome the shortcomings of the markowitz framework

Name four methods that have been proposed to overcome the shortcomings of the Markowitz framework.

  Payback period and accounting rate of return for equipment

Compute the (1) payback period and (2) accounting rate of return for this equipment.

  What is the beta of your portfolio

Your goal is to create a portfolio that has an expected return of 12.85 percent.

  The average annual return over the period

The average annual return over the period 1886-2006 for stocks that comprise the S&P 500 is 10%, and the standard deviation of returns is 20%. Based on these numbers, what is a 95% confidence interval for 2007 returns?

  Establish sinking fund earning annual interest rate

If he can establish a sinking fund earning an annual interest rate of 3%, how much should he pay for the business?

  Needs to receive retirement payment

Your friend decides that he needs to receive a retirement payment of 70,000 dollars per year from a retirement fund that is projected to earn 8.5% per year.

  What will be the companys return on equity

Pacific Packaging's ROE last year was only 5%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $252,000.  Under these conditions, the tax rate will b..

  What movement in the foreign exchange rate will result

What does it mean to be net long? What movement in the foreign exchange rate will result in a loss? What does it mean to be net short?

  The present value of the associated interest tax shield

When a firm uses a permanent debt, the present value of the associated interest tax shield:

  Calculate the price of my bond in this market

Suppose the current yield for a one-year treasury bond is 2%, Calculate the price of my bond in this market

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd