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Which is true about risky assets A. Risk premium is difference between return on a risky asset5 and return on mkt portfolio B. Expected return on asset is = to sum of possible returns divided by their possible probabilities C) Risk premium is the expected return on a risky asset less the return on a risk free asset D) comparison of 2 different risky assets cannot be simplified by calculating the expected return for each E) expected returns depend on the states of the economy but not the associated proximities
The total market value of General Motors (GM) is $10 billion. GM has a market value of $7 billion of equity and a face value of $10 billion of debt. What are the weights in equity and debt that are used for calculating the WACC?
Suppose you are a finance student interviewing for a job and the interviewers ask you what would cause an increase in net working capital. Which of the following would be the best response?
Your parents will retire in 14 years. They currently have $300,000, and they think they will need $1 million at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?
Leverage magnifies losses associated with declines in asset values but not with gains in asset values. This asymmetry is why bank regulators have outlawed leverage by banks that benefit from FDIC insurance.
A convertible security may be tendered for shares of common stock in the issuing firm. In other words, the bonds or preferred stock may be converted to common stock. Result in new capital for the firm. Do not result in new capital for the firm.
A one-year bond offers a yield of 6% and a two year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond next year?
A British firm needs 4M Australian $. An Australian firm needs 2M BP. There FX rate is 2 A$/BP. The British firm has access to a 10% fixed interest rate and also a variable rate of LIBOR. The Australian firm has access to a fixed interest rate of 7% ..
Apocalyptica Corporation is expected to pay the following dividends over the next four years: $ 3, $ 10, $ 15, and $ 3.08. Afterwards, the company pledges to maintain a constant 5 percent growth rate in dividends, forever. If the required return on t..
Determine the expected rate of return on equity under each of the working capital policies. Which working capital policy is riskier? Explain.
All the following are cautions managers and investors should consider when evaluating a firm using ratio analysis EXCEPT:
Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,..
Two years ago Abilia purchased a $13,000 car; she paid $2,500 down and borrowed the rest. She took a fixed rate 60-month instalment loan at a stated rate of 7.0% per year. Interest rates have fallen during the last two years and she can refinance her..
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