First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0421. The standard deviation of the returns on the market portfolio is 18 percent and the expected market risk premium is 6.4 percent. The company has bonds outstanding with a total market value of $55.1 million and a yield to maturity of 5.3 percent. The company also has 4.3 million shares of common stock outstanding, each selling for $50. The company’s CEO considers the firm’s current debt-equity ratio optimal. The corporate tax rate is 21 percent and Treasury bills currently yield 2.7 percent. The company is considering the purchase of additional equipment that would cost $49.5 million. The expected unlevered cash flows from the equipment are $16.55 million per year for 5 years. Purchasing the equipment will not change the risk level of the firm. |
Calculate the NPV of the project. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
*Please rate thumbs up
First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0421. The...
First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0516. The standard deviation of the returns on the market portfolio is 21 percent and the expected market risk premium is 6.3 percent. The company has bonds outstanding with a total market value of $57 million and a yield to maturity of 6.6 percent. The company also has 6.2 million shares of common stock outstanding, each selling for $31. The company’s CEO considers the firm’s current...
First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0516. The standard deviation of the returns on the market portfolio is 21 percent and the expected market risk premium is 6.3 percent. The company has bonds outstanding with a total market value of $57 million and a yield to maturity of 6.6 percent. The company also has 6.2 million shares of common stock outstanding, each selling for $31. The company’s CEO considers the firm’s current...
First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0501. The standard deviation of the returns on the market portfolio is 22 percent and the expected market risk premium is 6.6 percent. The company has bonds outstanding with a total market value of $56.7 million and a yield to maturity of 6.9 percent. The company also has 5.9 million shares of common stock outstanding, each selling for $34. The company’s CEO considers the firm’s current...
First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0486. The standard deviation of the returns on the market portfolio is 21 percent and the expected market risk premium is 6.7 percent. The company has bonds outstanding with a total market value of $55.4 million and a yield to maturity of 5.6 percent. The company also has 4.6 million shares of common stock outstanding, each selling for $47. The company’s CEO considers the firm’s current...
First and Ten Corporation's stock returns have a covariance with the market portfolio of 0461. The standard deviation of the returns on the market portfolio is 20 percent and the expected market risk premium is 7.2 percent. The company has bonds outstanding with a total market value of $55.9 million and a yield to maturity of 6.1 percent. The company also has 5.1 million shares of common stock outstanding, each selling for $42 The company's CEO considers the firm's current...
Problem 18-13 WACC First and Ten Corporation's stock returns have a covariance with the market portfolio of .0516. The standard deviation of the returns on the market portfolio is 21 percent and the expected market risk premium is 6.3 percent. The company has bonds outstanding with a total market value of $57 million and a yield to maturity of 6.6 percent. The company also has 6.2 million shares of common stock outstanding, each selling for $31. The company's CEO considers...
HAPPY stock returns have a covariance with the market portfolio of 0.036. The standard deviation of the returns on the market portfolio is 20%, and the expected market risk premium is 7.5%. The company has bonds outstanding total market value of $35 million. The bond is 10% annual coupon with one-year maturity and sold each at 101.852% of the face value of $1000. The company also has 6 million shares of common stock outstanding, each selling for $20. The corporate...
a) Consider a stock that has a covariance of returns to the market of 0.0182. The standard deviation of the market is 0.158. What is the beta of this stock? Enter your answer rounded to 2 DECIMAL PLACES. b) The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the flu virus, promises a long-term annual return of 8%. The expected return of the market index is RM = 11%, the...
Morrow Corp. has an EBIT of $785,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 11 percent and the corporate tax rate is 21 percent. The company also has a perpetual bond issue outstanding with a market value of $1.85 million. What is the value of the company? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)...
You have prepared the following scenario analysis for the returns of the market index portfolio, M, and a stock. Assume that each scenario is equally likely. 1. Rate of return Scenario Bust Boom Market 10% 30% Stock 14% 26% a. Find the variance of the market and the stock, and beta of the stock. b. What is the expected rate of return on the stock and the market index? If the T-bill rate is 6 percent, what does the CAPM...