What was the realized risk premium on the stock

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Reference no: EM131903239

1. Green Valley Farms is considering either leasing or buying some new farm equipment. The lessor will charge $22,000 a year lease. The purchase price is $62,000. The equipment has a 3-year life after which time it will be worthless. Green Valley Farms uses straight-line depreciation, has a 32 percent tax rate, borrows money at 9 percent, and has sufficient tax loss carryovers to offset any potential taxable income the firm might have over the next five years. What is the net advantage to leasing?

$6,312

$7,770

$5,044

$8,781

$5,669

2. A certain stock had returns of 12 percent, -8 percent, 18 percent, 22 percent, and 11 percent in each of the last five years respectively. Over the same period, the risk free rate of return was 3.70 percent. What was the realized risk premium on the stock?

A. 6.1 percent

B. 7.3 percent

C. 8.2 percent

D. 11.0 percent

Reference no: EM131903239

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