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Finance Questions
The cost of equity for RJ Corporation is 8.4 percent and the debt-equity ratio is .6....
What is the cost of equity for a firm that has a beta of 1.2 if...
The expected value, standard deviation of returns, and coefficient of variation for asset A are ________....
What is the expected market return if the expected return on asset X is 20 percent,...
Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while...
What would be the cost of new common stock equity for Tangshan Mining if the firm...
What is the profitability index of a project that has an initial cash outflow of $600,...
How much are you willing to pay for one share of Jumbo Trout stock if the...
Atlas Mines has adopted a policy of increasing the annual dividend on its common stock at...
Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and...
Net income $100,000; Depreciation expense $10,000; Net increase in accounts: receivable $5,000; Net increase in accounts:...
Assume that ¥118.37 equal $1. Also assume that 7.4518SKr equal $1. How many Japanese yen can...
Suppose today's exchange rate is $1.480/€.
Suppose today's exchange rate is $1.480/€. The three-month interest rates on dollars and euros are 4% per annum and 3% per annum, respectively. The three-month forward rate is $1.475/€. A foreign exchange advisory service has predicted that the euro will
Coaldale Bank has an issue of preferred stock with a $5.65 stated dividend that just sold for $106 per share. What is the bank’s cost of preferred stock? (Round the final answer to 2 decimal places.)
You are considering a new product launch. The project will cost $2,150,000, have a 4-year life, and have no salvage value; depreciation is straight-line to 0. Sales are projected at 150 units per year; price per unit will be $28,000; variable cost per uni
Suppose you accept your parents’ offer of a 2007 BMW M6 convertible, but that’s not the kind of car you want. instead, you sell the car for $61,000...
Your best friend consults you for investment advice. You learn that his tax rate is 38%, and he has the following current investments and debts: • A car loan with an outstanding balance of $5,000 and a 4.79 APR (monthly compounding) • Credit cards with
Your firm is considering the purchase of a new office phone system. You can either pay $32,500 now, or $950 per month for 40 months. a. Suppose your firm currently borrows at a rate of 5% per year (APR with monthly compounding). Which payment plan is mo
Your uncle Fred just purchased a new boat. He brags to you about the low 7.2% interest rate (APR, monthly compounding) he obtained from the dealer. The rate is even lower than the rate he could have obtained on his home equity loan (8.2% APR, monthly comp
Your best taxable investment opportunity has an EAR of 4.3%. Your best tax-free investment opportunity has an EAR of 2.5%. If your tax rate is 25%, which opportunity provides the higher after-tax interest rate?
What is the shape of the yield curve given the term structure below? What expectations are investors likely to have about future interest rates? Term 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr Rate (EAR %)
Suppose the term structure of risk-free interest rates is as shown below: Term 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr Rate (EAR %) 2.09 2.41 2.69 3.38 3.73 4.28 4.97 a. Calculate the present value of an investment that pays $1,000 in t
The mortgage on your house is five years old. It required monthly payments of $1,450, had an original term of 30 years, and had an interest rate of 8% (APR). In the intervening five years, interest rates have fallen and so you have decided to refinance
Consider a project that requires an initial investment of $98,000 and will produce a single cash flow of $155,000 in 6 years. a. What is the NPV of this project if the 6-year interest rate is 4.9% (EAR)? b. What is the NPV of this project if the 6-year
If the rate of inflation is 4.4%, what nominal interest rate is necessary for you to earn a 3.9% real interest rate on your investment?
In 1975, interest rates were 7.84% and the rate of inflation was 12.39% in the United States. What was the real interest rate in 1975? How would the purchasing power of your savings have changed over the year?
You need a new car and the dealer has offered you a price of $20,000, with the following payment options: (a) pay cash and receive a $2,000 rebate, or (b) pay a $5,000 down payment and finance the rest with a 0% APR loan over 30 months. But having just q
You have just purchased a home and taken out a $460,000 mortgage. The mortgage has a 30-year term with monthly payments and an APR of 5.20%. a. How much will you pay in interest, and how much will you pay in principal, during the first year? b. How mu
Capital One is advertising a 60-month, 5.79% APR motorcycle loan. If you need to borrow $6,000 to purchase your dream Harley Davidson, what will your monthly payment be?
Suppose you invest $108 in a bank account, and five years later it has grown to $131.63. a. What APR did you receive, if the interest was compounded semiannually? b. What APR did you receive if the interest was compounded monthly?
You can earn $58 in interest on a $1,000 deposit for eight months. If the EAR is the same regardless of the length of the investment, how much interest will you earn on a $1,000 deposit for: a. 9 months. b. 1 year. c. 1.5 years.
You have found three investment choices for a one-year deposit: 11% APR compounded monthly, 9% APR compounded annually, and 10% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.)
Which do you prefer: a bank account that pays 8% per year (EAR) for three years or a. An account that pays 4% every six months for three years? b. An account that pays 12% every 18 months for three years?
Your bank is offering you an account that will pay 16% interest in total for a two-year deposit. Determine the equivalent discount rate for a period length of: a. Six months. b. One year. c. One month.
Yerba Industries is an all-equity firm whose stock has a beta of 0.60 and an expected return of 20%. Suppose it issues new risk-free debt with a 6% yield and repurchase 5% of its stock. Assume perfect capital markets. a. What is the beta of Yerba st
Zelnor, Inc., is an all-equity firm with 140 million shares outstanding currently trading for $10.43 per share. Suppose Zelnor decides to grant a total of 14 million new shares to employees as part of a new compensation plan. The firm argues that this new
In mid-2018, Qualcomm Inc. had $21 billion in debt, total equity capitalization of $79 billion, and an equity beta of 1.49 (as reported on Yahoo! Finance). Included in Qualcomm's assets was $37 billion in cash and risk-free securities. Assume that the ris
Global Pistons (GP) has common stock with a market value of $280 million and debt with a value of $208 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets. a. Suppose GP issues $208 million
Hardmon Enterprises is currently an all-equity firm with an expected return of 15%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. (Assume perfect capital markets.) a. Suppose Hardmon borrows to th
Schwartz Industry is an industrial company with 113.4 million shares outstanding and a market capitalization (equity value) of $4.09 billion. It has $1.61 billion of debt outstanding. Management have decided to delever the firm by issuing new equity to re
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $5,000 on which it pays interest of 10% each year. Both companies have identical projects that generate free cash flows of $5,100 or $5,400 each year. After paying any interest on
Wolfrum Technology (WT) has no debt. Its assets will be worth $422 million one year from now if the economy is strong, but only $233 million in one year if the economy is weak. Both events are equally likely. The market value today of its assets is $259 m
In addition to footwear, Kenneth Cole Productions designs and sources handbags, apparel, and other accessories. You decide, therefore, to consider comparables for KCP outside the footwear industry. You also know the following about KCP: it has sales of $5
Halliford Corporation expects to have earnings this coming year of $3.36 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 45% of its earnings. It will then retain 20% of
Procter and Gamble (PG) paid an annual dividend of $2.83 in 2018. You expect PG to increase its dividends by 7.8% per year for the next five years (through 2023), and there after by 2.7% per year. If the appropriate equity cost of capital for Procter an
You notice that PepsiCo (PEP) has a stock price of $105.64 and EPS of $6.3.Its competitor, the Coca-Cola Company (KO), has EPS of $2.43. Estimate the value of a share of Coca-Cola stock using only this data.
Krell Industries has a share price of $21.87 today. If Krell is expected to pay a dividend of $0.67 this year, and its stock price is expected to grow to $24.35 at the end of the year, what is Krell's dividend yield and equity cost of capital? What i
Anle Corporation has a current price of $14, is expected to pay a dividend of $2 in one year, and its expected price right after paying that dividend is $24. a. What is Anle's expected dividend yield? b. What is Anle's expected capital gain rate? c.
Bauer Industries is an automobile manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight trucks. Bauer plans to use a cost of capital of 12.2% to evaluate this project. Based on extensive research, i
Suppose the market risk premium is 6% and the risk-free interest rate is 4%. Using the data in the table, calculate the expected return of investing in a. Starbucks' stock. b. Hershey's stock. c. Autodesk's stock. Why don't all investors hold Auto
You turn on the news and find out the stock market has gone up 11%. Based on the data in the table here, by how much do you expect each of the following stocks to have gone up or down: (1) Starbucks, (2) Tiffany & Co., (3) Hershey, and (4) McDonald's
What does the beta of a stock measure?
identify each of the following risks as most likely to be systematic risk or diversifiable risk: a. The risk that your main production plant is shut down due to a tornado. b. The risk that the economy slows, decreasing demand for your firm's products.
Explain why the risk premium of a stock does not depend on its diversifiable risk.
Debits to Work in Process Inventory are accompanied by a credit to all but which one...
1. Cash conversion cycle
Rockingham Motors issued a 30-year, 8 percent semiannual bond 3 years ago. The bond currently sells...
USA Manufacturing issued 30-year, 7.5 percent semiannual bonds 6 years ago. The bonds currently sell at...
The 7 percent preferred stock of Midwest Muffler and Towing is selling for $65 per share....
Country cooks cost of equity is 16.2 percent and it’s after tax cost of debt is...
The Five and Dime Store has a cost of equity of 14.8 percent, a pretax cost...
Traditional Bank has an issue of preferred stock with an annual dividend of $7.50 that just...
Precision Cuts has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent,...
The preferred stock of Dolphin Pools pays an annual dividend of $5.25 a share and sells...
A project has expected cash inflows, starting with Year 1, of $900, $1,200, $1,500, and finally...
The Black Horse is currently considering a project that will produce cash inflows of $11,000 a...
A project has the following cash flows. What is the payback period? Year Cash Flow 0...
What is the net present value of the following set of cash flows at a discount...
The profitability index reflects the value created per dollar: a. invested. b. of sales. c. of...
Which one of the following methods of analysis ignores the time value of money? Net present...
What is "The Interest Rate Factor", and how is it used in Time Value of Money calculations?
What are the Rules for Valuing Cash Flows?"
What role does "Compounding" play in the valuing of cash flows at different points in time?
Which one of the following indicates that a project is definitely acceptable? A. Profitability index greater than...
Of these choices, a risk-adverse investor who prefers to minimize interest rate risk is most apt...
Which one of the following bonds is the most sensitive to changes in market interest rates?...
A debenture is: a. an unsecured bond b. a bearer form bond c. a bond with...
Bond ratings classify bonds based on: interest rate, inflation rate, and default risk. liquidity, interest rate,...
Gruber Corp. pays a constant $9 dividend on its stock. The company will maintain this dividned...
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