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Calculate the cost of retained earnings (or internal equity) using: (a) the Gordon's growth model; (b) the bond plus method; and (c) the capital asset pricing model.
Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.45 and an alpha of _.2 percent per month. Amonth later, the market is up by 5 percent, and United Futon is
Using the data provided, calculate the historical weighted average cost of capital of Electro Tool Co. before the retirement of the debentures and the sale and lease-back action.
Geothermal Corporation has just received good news: its earnings increased by 20 percent from last year"s value. Most investors are anticipating an increase of 25 percent.
Calculate the firm's weighted average cost of capital, and (b) explain why you used the particular weighting system.
If an investment with a beta of 0.6 offers an expected return of 8.5 percent, does it have a positive NPV? If the market expects a return of 12.5 percent from stock A, what is its beta?
Assume that the risk-free rate of return is 6 percent and the market rate of return is 12 percent. Which projects should be selected?
Explain how these estimates would be used to calculate an abnormal return.
Then Goldman Sachs went looking for buyers. They lined up 500 institutional and individual investors worldwide, and resold all the shares at 716 pence ($11.70). The resale was complete before the Lo
The authorized share capital of the Alfred Cake Company is 100,000 shares. The equity is currently shown in the company"s books as follows:
Calculate what Johnson would receive from the Japanese customer in US dollars using the spot rate at the time of payment.
Currency translation adjustment and contributions to an employee benefit trust have been deducted from retained earnings.
Construct an equity account (like the one in Table 14.4) for Inbox on the day after its founding. Ignore any legal or administrative costs of setting up the company.
How much would Bonjur have to pay in dollars for the purchase if it paid on April 1? If Bonjur paid for the purchase using the July 1 spot rate, what would be the exchange gain or loss?
Which of the following features would increase the value of a corporate bond? Which would reduce its value?
Arbitrage and Exchange Gain or Loss. You own $10,000. The dollar rate on the Swiss franc is 1.380 SFs. Based on the table above, are arbitrage profits possible? What is the gain (loss) in dollars?
Suppose you are valuing a future stream of high-risk (high-beta) cash outflows. High risk means a high discount rate. But the higher the discount rate, the less the present value. This seems to say
Estimate the opportunity cost of capital and the project"s PV (using the same rate to discount each cash flow). What are the certainty-equivalent cash flows in each year?
If the required return is 10% and Robb Computer applies the present value index decision rule, which project should the firm accept?
KTI's return on new investments is 15% and their equity cost of capital is 12%. What is the value of a share of KTI's stock?
After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stock's expected constant growth rate after t = 4, i.e., what is X?
What is the forgone lost future value of her $15,000 over the 40 years at 6 percent? (b) What would be the forgone lost future value of $60,000 over 40 years if Delores had to pay allthe costs for
What are the four chief categories of real options?
Herbal Resources is a small but profitable producer of dietary supplements for pets. This is not a high-tech business, but Herbal"s earnings have averaged around $1.2 million after tax, largely on t