QUESTION Which of the following statements is CORRECT?Answer a.Diversifiable risk cannot be completely diversified away.b.Lower beta stocks have higher required returns.c.A stocks beta indicates its diversifiable risk.d.Two securities with the same stand-alone risk must have the same betas.e.The slope of th 9. e. The slope of the security market line is equal to the market […]
QUESTION Please do Not answer by showing the spreading sheet layout!The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is looking up. As a result, the cemetery project will provide a net cash inflow of $ 60,000 for the firm during a) first year net […]
QUESTION Simkins Renovations Inc. is considering a project that has the following cash flow data. What is the projects IRR? Note that a projects IRR can be less than the WACC (and even negative), in which case it will be rejected.Year 0 1 2 3 4Cash flows -$850 $300 $290 $280 $270Answer13.13%14.44%15.89%17. Formula for IRR: […]
QUESTION You purchase 1000 shares of Spears Grinders, Inc. stock for $45 per share. A year later, the stock pays a dividend of $1.25 per share and it sells for $49.a) calculate your total dollar return.b) Calculate your total percentage return.C) do the answers to (a) and (b) depend on whether you sell the s […]
QUESTION Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects?Answer a.Project A, wh 13) Option (b), should be chosen. (for positive NPV, […]
QUESTION Retirement Planning InfoAn individual is currently 30 years old and she is planning her financial needs upon retirement. She will retire at age 65 (exactly 35 years from now) and she plans on funding 20 years of retirement with her investments. Ignore any social security payments and ignore any taxe This question has 3 […]
QUESTION Kedia Inc. forecasts a negative free cash flow for the coming year, FCF1 = -10 million, but it expects positive numbers thereafter, with FCF2= $14 million. After year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14.0%, what is the firms […]
QUESTION A zero coupon bond matures in 5 years. The market interest for the bond is 10%.What will be the price of the zero? Calculating the price of the Zero-coupon bond using excel sheet:We know that for Zero coupon bond, there will be no coupon payments.Therefore, the coupon payment is zero.According to the given information,Number […]
QUESTION A company is going to issue a $1,000 par value bond which pays 8% in annual interest. The company expects investors to pay $910 for the 20-year bond. The expected flotation cost per bond is $42. What is the firms cost of debt in this example? (Assume a 34% tax rate.) Face value = […]
QUESTION a) Suppose you have three personal loans outstanding to your friend Elizabeth. A payment of $1,000 is due today, a $1,500 payment is due one year from now, and a $2,500 payment is due two years from now. You would like to consolidate the three loans into one, with 36 equal monthly payments, beginnin […]
