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Holland Auto Parts is considering a merger with Workman Car Parts. Workman's market-determined beta is 0.9, and the firm currently is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. If Holland acquires Workman, it will increase the debt to 60%, at an interest rate of 9%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 4%. What will Workman's required rate of return on equity be after it is acquired?
You are opening an IRA that earns 6% interest compounded daily. You wish to make monthly deposits into the IRA. You also want to purchase a new car for $25,000. You plan to set aside $800 every month, which will be divided between your IRA and your c..
Your sister is considering to add one additional stock to a three stock portfolio, to form a four stock portfolio. The three stocks currently held all have b=1.0, and they are perfectly positively correlated with the market. However, stock A's standa..
Prepare a graph in excel where present the movement of the value of each action to the period. Indicate therein the areas where change is more drastic and that happened that day that could cause this change.
What is the value of a European call option if the underlying stock price is $81, the strike price is $90, the underlying stock volatility is 50 percent, and the risk-free rate is 3 percent? Assume the option has 60 days to expiration
Cyberco Corporation has 5 million shares of stock outstanding. Cyberco's after-tax profits are $15 million and the corporation's stock is selling at a price-earnings multiple of 10, for a stock price of $30 per share. Calculate Cyberco's earnings per..
Boutique Guitars and Gear carries several types of strings. Generate a payoff table, and compute the expected value for each alternative.
A for-profit firm must adjust the cost of debt for the tax benefit associated with its deductibility (multiply by 1-T). A not-for-profit firm also needs to adjust the debt to an after-tax basis even though it does not pay taxes (by using the tax rate..
Determine the amount of additional financing needed and pro forma financial statements for 2007 under each of the given condition.
The net operating income (NOI) for a small income property is expected to be $150,000 for the first year. Financing will be based on a 1.2 debt coverage ratio applied to the first year NOI, will have a 10 percent interest rate, and will be amortized ..
The marketing research department has determined that expected sales will be 22,000 units, with a standard deviation of 4,000 units. What is the probability that Westerfield will incur operating losses from the sale of the snowblower?
Jackson Central has a 6-year, 8% annual coupon bond with a $1,000 par value. Earls Enterprises has a 12-year, 8% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 6%. Which of these two bonds should you buy ..
A portfolio generates an annual return of 14.5%, a beta of 0.7, and a standard deviation of 18.5%. The market index return is 16.5% and has a standard deviation of 26.0%. What is the M2 measure of the portfolio if the risk-free rate is 4%?
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