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A Company has equity of $10,000,000 with 100,000 shares of stock,their net earnings are $5,000,000 and they have a PE of 15 times.
The stock beta is 0.5 and the market return is 12% with a 5% risk premium.
They have $10,000,000 of debt in bonds with a market value at par and a coupon of 6%.
What is the company's Debt ratio ? What is their Wacc? If they were to change their ratio to 50/50 what would be there WACC ? What would be their stock Beta and required return?
The required rate of return is 10%. What is a fair price for the investment - assuming the discount rate and expected cash flows don't change - exactly 3 years from today. (In other words, what would the investment sell for in 3 years?
Ozone Depletion, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Using your answers to part (c), explain why Ozone's choice of capital structure is irr..
During a normal economy, the common stock of Douglass & Frank is expected to return 12.5%. During a recession, the expected return is -5% and during a boom, the expected return is 18%.
What is the present value of $15,000 to be received 11 years from today when the annual discount rate is 10%?
What are some considerations a company should take into account when establishing dividend policy?
Select one of the market structures (monopoly, oligopoly, monopolistic competition, or perfect competition) and identify a company for that market structure.
If Bluefield is evaluating a new investment project which has the same risk as the firm's typical project, illustrate what rate should it utilize to discount the project's cash flows.
Empirical evidence shows that financial market value movements are essentially random. This is evidence that:
Suppose you are planning hiring an investment advisor to help you manage your portfolio. This advisor tells you that she has consistently "beaten the market" over the last five years.
Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20 percent. Portfolio AB was created by investing in a combination of Stock A and Stock B.
An investment project costs $15,000 and hasannual cash flows of $3,800 for six years.
Suppose that annual interest rates in the U.S. are 4 percent, while interest rates in France are 6%. According to IRP, what should the forward rate premium or discount of the euro be.
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