firms with the highest equity betas have:
firms with the highest equity betas have:
Homework Answers
high operating leverage and high financial leverage.
Two firms have the same asset beta but different equity betas. The direct cause is likely:...
Two firms have the same asset beta but different equity betas. The direct cause is likely: a. The importance of variable costs varies across these firms b. The firms have different proportions of debt relative to equity b. One firm’s sales are more cyclical than the other c. All of the above d. None of the above
the following firms are likely to have high asset betas:
the following firms are likely to have high asset betas:
firms in the following sectors tend to have high betas:
firms in the following sectors tend to have high betas:
Which of the following is true of asset betas? a. Asset betas are expected to vary...
Which of the following is true of asset betas? a. Asset betas are expected to vary greatly within firms in the same industry. b. Businesses that are less sensitive to market and economic conditions tend to have higher asset betas than more cyclical industries. c. Businesses that are less sensitive to market and economic conditions tend to have lower asset betas than more cyclical industries. d. A and B are correct.
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas...
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.17 if both were all equity financed. The market value information for each company is shown here: North Pole South Pole Debt $ 3,020,000 $ 3,930,000 Equity $ 3,930,000 $ 3,020,000 The expected return on the market portfolio is 12 percent and the risk-free rate is 4 percent. Both companies are subject to a corporate tax rate of 22 percent. Assume...
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas...
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.19 if both were all equity financed. The market value information for each company is shown here: North Pole Debt =$ 3,040,000 south pole debt= $ 3,950,000 north pole Equity =$ 3,950,000 south pole equity= $ 3,040,000 The expected return on the market portfolio is 12.2 percent and the risk-free rate is 4.2 percent. Both companies are subject to a corporate tax rate...
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas...
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.21 if both were all equity financed. The market value information for each company is shown here: North Pole South Pole Debt $ 3,010,000 $ 3,910,000 Equity $ 3,910,000 $ 3,010,000 The expected return on the market portfolio is 12 percent, and the risk-free rate is 4.3 percent. Both companies are subject to a corporate tax rate of 35 percent. Assume...
Firms that have the highest rates of new product success(82.5% versus 52.9% for other firm) a)...
Firms that have the highest rates of new product success(82.5% versus 52.9% for other firm) a) are more likely to employ informal and unstructured process for concept selection b)are more likely to have global market and operations strategies c)are less likely to use social media and other communication to gather information d)are less likely to rely on portfolio analysis
Two firms are identical except for their capital structure. Company A is funded by 30% debt...
Two firms are identical except for their capital structure. Company A is funded by 30% debt and 70% equity. Company B is funded by 40% debt and 60% equity. (a) What are the relationships between their asset betas and equity betas? Fill in the blank. Company A (“>”, “=”, or “<”) Company B A’s Asset beta B’s Asset beta A’s Equity beta B’s Equity beta (b) Briefly explain your rationale for the answers provided in part (a) above.
3. Intermountain Resources Inc. has three divisions with the following equity betas: Proportion Division Beta of...
3. Intermountain Resources Inc. has three divisions with the following equity betas: Proportion Division Beta of Assets Lumber 0.7 X 50% Coal 1.2 X 30% Tourism 1.3 X 20% The risk free rate is 7% and the market risk premium is 8%. The firm's debt costs 7.6% per year. Its tax rate is 25% a) What is Intermountain's cost of equity? b) If the firm uses 40% equity and 60% debt, what is the WACC? E c hare This is...
3. Intermountain Resources Inc. has three divisions with the following equity betas: Proportion Division Beta of Assets Lumber 0.7 X 50% Coal 1.2 X 30% Tourism 1.3 X 20% The risk free rate is 7% and the market risk premium is 8%. The firm's debt costs 7.6% per year. Its tax rate is 25% a) What is Intermountain's cost of equity? b) If the firm uses 40% equity and 60% debt, what is the WACC? E c hare This is...
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