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The actively managed fund has a chance to outperform the market while the index fund will deliver the return of the market (less management and trading costs). What excess return per year must the a
Thomas is considering selling a particular stock to help pay some university expenses. The stock is valued at $100,000, and if he sells it, the portfolio's beta will increase to 1.8. What is the bet
The company follows a constant pay out ratio dividend policy. If the company would like to pay $8 million in dividends next year, how much must Breaking News earn
Assume that the project will always be backed by debt equal to 60% of the contemporaneous project value. the tax rate is 34%, debt will have required return 6% and equity will have required return 9
The required return on the market is 15%. BRR has debt with market value $30 million and equity with market value $6 million. What is BRR's unlevered cost of capital?
A company wants to invest in a new advertising program. Using the NPV method of capital budgeting, determine the proposal's appropriateness and economic viability with the following information:
Calculate the value of the unlevered firm if the firm has a marginal tax rate of 0%. Calculate the value of the unlevered firm if the firm has a marginal tax rate of 30%.
Construct the equity accounts for hot shots at the end of its first year in business, and calculate the firm's market capitalization.
Sosbee Foods has a working capital/total assets ratio of 0.2, a retained earnings/ total assets ratio of 0.1, an earnings before interest and taxes / total assets ratio of 0.25, a market value of eq
What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in
Hickock Mining is evaluating when to open a gold mine. The mine has 39,200 ounces of gold left that can be mined, and mining operations will produce 5,600 ounces per year. What is the value of the o
Describe one experience you have had that indicated to you, and illustrates to us, that financial markets are global in nature; where what happens in financial markets in China or Europe impacts wha
Imprudential, Inc. has an unfunded pension liability of $850 million that must be paid in 25 years. To assess the value of the firm's stock, financial analysts want to discount this liability back t
If the firm is evaluation a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows?
Geothermal corporation issued a press release before the stock market opened announcing that its earnings have decreased by 30% over the last year earnings. Explain how each of the following individ
Calculate the actual return (also called percentage return) on your investment over the last year. Calculate (i) the dividend yield and (ii) the percentage capital gain. Calculate the real rate of ret
The company anticipates cash flows of $690,846, $761,985, $1,054,869, $1,653,694, $1,972,952, and $2,301,260 over the next six years. (Round answer to 2 decimal places, e.g. 15.25.) What is the payb
What is the NPV of the systems? (Enter negative amounts using negative sign e.g. -45.25. Round answers to 2 decimal places, e.g. 15.25.)
Impact of Lehman Brothers' bankruptcy on individual wealth. Explain how the bankruptcy of Lehman Brothers (the largest bankruptcy ever) affected the wealth and in come of many different types of ind
A U.S. Government bond with a face amount of $10,000 with 8 years to maturity is yielding 3.5%. What is the current selling price?
A company's bonds currently sell for $1,150. They have a 6-year maturity, an annual coupon of $85, and a par value of $1,000. What is their current yield?
When considering stand-alone risk, the return distribution of a less risky investment is more peaked ("tighter") than that of a riskier investment.
What is the European call option price and European put option price, according to the Black-Scholes model? What is the cost of buying a protective put? What is the cost of writing a covered call?
How effective do you believe the FOMC has been using open market operations to achieve sustainable economic growth and price stability?
If the current market price is $860, what will be the approximate capital gain yield of this bond over the next year if its yield to maturity remains unchanged?