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Evaluate the risk of loss and the opportunity for profit when traders buy or sell puts and calls and Evaluate call and put options.
"One type of leverage affects both EBIT and EPS. The other type affects only EPS." Explain this statement.Why is the followings statement true? "Other things being the same, firms with relatively st
You work for Athens Inc. and you must estimate the Year 1 operating cash flow for a project with the following data. What is the Year 1 operating cash flow?
This company is considering the acquisition of a machine that costs $360,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $120,000,
The expected average rate of retun for a proposed investment of $500,000 in a fixed asset with a useful life of four years, straight-line depreciation, no residual value, and an expected total net i
You want to buy a car for $25,000 and have $3,000 to put down. Your payment is $516.67 for 48 months. What is your interest rate?
What rate of return will be earned by an investor who purchases the bond and holds it for 1 year if the bond's yield to maturity at the end of the year is 8.1%?
Soledad Company preferred stock has a market price of $20. If it has a yearly dividend of $1.50, what is your expected rate of return if you purchase the stock at its market price?
You have $350 per month to spend on a car payment. If your credit union charged 7.5% interest on a used car, how much car can you purchase if you will only finance for 4 years.
Your friend claims that he invested $5,000 seven years ago and that this investment is worth $38,700 today. For this to be true.
A sporting goods store with sales for the year of $400,000 and other income of $32,000 has operating expenses of $123,000. Its cost of goods sold is $207,000. What are its gross margins, operating p
Simon Fixtures Corp. is expected to pay $2.00 per share in dividends at the end of the next 12 months. The growth rate in dividends is expected to be constant at 8% per year. If the stock is selling
Beatrice invests $1,430 in an account that pays 4 percent simple interest. How much more could she have earned over a 4-year period if the interest had compounded annually?
Positive Tronics Industries preferred stock has a par value of $100 and pays a dividend of $6.00 per share. It presently sells for $87 per share. What do investors require as a rate of return on th
Suppose a stock had an initial price of $91 per share, paid a dividend of $2.40 per share during the year, and had an ending share price of $102. Compute the percentage total return.
Stock B has a beta of 0.87 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not?
If it expects that the pound will appreciate against the dollar in the future, should it hedge its exports with a forward contract?
Sun Instruments expects to issue new tock at $34 a share with estimated flotation cost of 7 percent of the market price. The company currently pays a $2.10 cash divident and has a 6 percent growth r
Linen Supply Co. paid a dividend of $3.25 on its common stock yesterday. The company's dividends are expected to grow at a constant rate of 5.5% indefinitely. If the required rate of return on this
Raceway motors issued a 20 years, 8percent semiannual bond 3 years ago. The bond currently sells for 98.6percent of its face value. The company's tax rate is 34 percent. What is the aftertax cost o
Jalisco has a beta of 1.5 when the market risk premium is 8% and the risk free rate is 3.5%. What is Jalisco's cost of equity capital?
You are thinking about buying a new car. The sticker price is $22,000 and you have $3,000 to put towards the down payment. If you can negotiate an annual interest rate of 6 percent APR (with monthly
Suppose the interest rate is 9.2% APR with monthly compounding. What is the present value of an annuity that pays $85 every 6 months for 7 years?
The real risk-free rate is 4%. Inflation is expected to be 1% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securiti
Suppose a firm estimates its cost of capital for the coming year to be 10 percent. What might be reasonable costs of capital for average-risk, high-risk, and low-risk projects?