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There are multiple projects that can be classified into safe projects and risky projects. A safe project's cash flow next year will be $4,000 with probability 0.3 and $6,000 with probability 0.7. A risky project's cash flow next year will be $1,500 with probability 0.5and $8,500 with probability 0.5. Each firm can invest in only one project. LoDebt Corporation has debt obligation of $2,000 next year while HiDebt Corporation has debt obligation nextyear of $3,000. Each firm will choose exactly one project and the cash flow from the chosen project will be the only cash flow for the firm. Assume that each firm's shareholders decidewhich project to accept. There are no direct costs of bankruptcy. All investors are risk-neutral and require return of 20%. Ignore taxes. Determine which type of project will shareholdersof LoDebt choose and which type of project will shareholders of HiDebt choose. What is the value of each firm? Discuss why the values are same or different.
An insurance company sells a full coverage policy to Fred and Betty who face identical risk (Correlation = 1.0. Perfectly correlated).
A survey of adults in a region found that 37?% name professional football as their favorite sport. You randomly select 11 adults in the region
why do u.s. corporations build manufacturing plants abroad when they can build them at
Its current liabilities are $250,000. What is the company's current ratio, and does that ratio good short-term financial strength?
Obtain the closing price, the change in price from the previous day, and the beta.
Calculate the expected returns on the stock market and on Chicago Gear stock. What is Chicago Gear's beta? What is Chicago Gear's required return according to the CAPM?
Why would a firm or government agency want to measure supplier performance?
A new 2-lanc road is needed in a part of town that is growing. At some point the road will need 4 lanes to handle the anticipated traffic.
Your company received a $7 million order on the last day of the year. You filled the order with $3 million worth of inventory.
The past five monthly returns for K and Company are 3.45 percent, 3.74 percent, -1.70 percent, -2.05 percent, and 8.25 percent. What is average monthly return
tally ho inn has annual sales of 737000. earnings before interest and taxes is equal to 21 percent of sales. for the
A stock with a beta of 1.6 is expected to return 13.4%. What are the market risk premium and the expected return on the market?
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