8-13. If a company's beta increased from 1.5 to 4.5, would its expected rate of return triple? Explain why or why not. (Hint: Assume the risk-free rate is 4 percent and the market risk premium is 5 percent.)
Q: you've observed the following returns on Pine Computer's stock over the past five years: -29.7 cent,…
A: Relation between real and nominal rateReal and nominal rate are related with each other through the…
Q: Shao Industries is considering a proposed project for its capital budget. The company estimates the…
A: It is difficult to arrive at a single accurate figure of the NPV as it is affected by many factors.…
Q: Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred…
A: The objective of the question is to calculate the cost of common equity for Pearson Motors. The…
Q: private gym is looking at a new set of sports equipment with an installed cost $465,000. This cost…
A: NPV is the time value based method of capital budgeting techniques and mostly used for selecting…
Q: Calculate the future value of the following annuities, assuming each annuity payment is made at the…
A: Annuity paymentsAnnual ratesInterest compoundedPeriod invested1$3,700.007.00%Semi-annually9…
Q: A lottery offers a $1,000,000 prize to be paid in 20 equal installments of $50,000 at the end of…
A: Annuity is a series of constant payments, yielding certain rate of interest. Future value is the…
Q: The production department is proposing the purchase of an automatic insertion machine. It has…
A: The internal rate of return is one method that allows to compare and rank projects based on their…
Q: Anita Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible…
A: The objective of this question is to calculate the amount by which Anita's taxes will be reduced if…
Q: None
A: The objective of the question is to calculate the Net Present Value (NPV) of replacing the old…
Q: Quinoa Farms just paid a dividend of $3.35 on its stock. The growth rate in dividends is expected to…
A:
Q: on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2…
A: Interest can be simple interest or compound interest in the business. Under compound interest,…
Q: Assume Highline Company has just paid an annual dividend of $1.06. Analysts are predicting an 11.3%…
A: Current Dividend = d0 = $1.06Growth Rate for next 5 Years = g5 = 11.3%Growth Rate after year 5 = g =…
Q: Project L requires an initial outlay at t = 0 of $35,000, its expected cash inflows are $11,000 per…
A: MIRR stands for modified internal rate of returns. It is one of the capital budgeting techniques to…
Q: You are operating an old machine that is expected to produce a cash inflow of $6,700 in each of the…
A:
Q: 15.)Calculate the price of a zero - coupon bond that matures in 10 years if the market interest rate…
A: A zero coupon bond is a financial market security that does not pay any periodic payments but…
Q: [The following information applies to the questions displayed below.] Project Y requires a $306,000…
A: PAYBACK PERIODPayback Period is one the Important Traditional Capital Budgeting Technique. Payback…
Q: A share of common stock can be valued by determining the value of its future cash flows.
A: We are given the following statement -A share of common stock can be valued by determining the…
Q: For each of the following situations involving single amounts, solve for the unknown. Assume that…
A: Given Data: ParticularsPresent ValueFuture ValueRate of…
Q: Consider a three-year project with the following information: Initial fixed asset investment =…
A: Sensitivity analysis determines how different values of an independent variable affect a particular…
Q: None
A: The net present value(NPV) of the project is calculated using following equationWhere, CF0 is the…
Q: Guthrie Enterprises needs someone to supply it with 145,000 cartons of machine screws per year to…
A: The initial cost is $1,850,000The no. of units to supply per year is 145,000The variable cost per…
Q: Five years ago you took out a 30-year mortgage with an APR of 6.20% for $206,000. If you were to…
A: Mortgage amount = $206,000Period = 30 YearsAPR = 6.20%Refinancing option after 45 years:Period = 20…
Q: Assume the annual return for the lowest turnover portfolio is 18% and the annual return for the…
A: A portfolio consists of two or more than two stocks. A portfolio can also consist of different…
Q: Delovely Productions Limited wants to raise $35 million for shows. rights offering will be used to…
A: The objective of the question is to calculate the value of a right at the present time for Delovely…
Q: Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying…
A: Net present value refers to the capital budgeting technique used to evaluate the profitability and…
Q: Problem 24-3 Bond ratings It is 2030 and the yields on corporate bonds are as follows: Aaa 8% A 10%…
A: BondFace valueCoupon rateYTMYears to maturityAaa bond$10,000,0009%8%10A bond$10,000,0009%10%10Ba…
Q: The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 17%, Its…
A: Given Data:Value of Debt = 1189No of shares = 576Market value per share = 4Cost of Equity = 17%Cost…
Q: 1. Four solutions are provided: AgNO3, Pb(NO3)2. HNO3 (strong acid) and Nal Mixing which of the…
A: The objective of the question is to identify which combinations of the given solutions will result…
Q: Let in and if represent the nominal 1-year interest rates for a home and foreign country,…
A: Option 2: ef = (1 + if) / (1 + ih) - 1Explanation:The question regarding the International Fisher…
Q: sts of $58,792 invested in a stock that has a beta = 1.7, $71,686 invested in a stock that has a…
A: Risk-free rate4.7%Last year's portfolio required return7.4%Current year's market risk premium rises…
Q: NPV for varying costs of capital LePew Cosmetics is evaluating a new fragrance-mixing machine. The…
A: Net present value refers to the capital budgeting used by the investors for decision-making by…
Q: The following table shows the projected free cash flows of an acquisition target. The potential…
A: Maximum acquisition price:The maximum acquisition price refers to the highest amount a potential…
Q: The loan will have a term of 54 months and monthly payments of $385.13. The interest rate on the…
A: Data givenMonthly payment = $385.13Number of monthly payments = 54Interest rate = 8.84% compounded…
Q: Which of the following is described as an online “living entity”? Social media résumé…
A: The objective of the question is to identify which type of resume can be described as an online…
Q: Which of the following is described as an online “living entity”? Social media résumé…
A: The correct answer is: Infographic résumé Explanation:An infographic resume is described as an…
Q: A proposed new project has projected sales of $215,000, costs of $104,000, and depreciation of…
A: Operating cash flows (OCF) is the cash flow generated from normal operations- Selling and producing…
Q: A piece of newly purchased industrial equipment costs $1,140,000 and is classified as seven-year…
A: MACRS refers to Modified Accelerated Cost Recovery System.Under MACRS,Annual depreciation allowance…
Q: None
A: The diversification is a process of eliminating unsystematic risk in portfolio. Unsystematic risk is…
Q: A client in the 33 percent marginal tax bracket is compar- ing a municipal bond that offers a 4.50…
A: Municipal bonds are tax free bonds. It means municipal bonds does not attracts tax. Hence after tax…
Q: Required information [The following information applies to the questions displayed below.] Project Y…
A: Income = $126,080Initial investment = $306,000Life of project = 5 yearsTo find: Project's accounting…
Q: Suzanne's Cleaners is considering a project that has th following cash flow data. What is the…
A: Payback period refers to the method of capital budgeting used for estimating the period taken to…
Q: Banyan Co.’s common stock currently sells for $41.75 per share. The growth rate is a constant 6%,…
A: To apply the constant dividend growth model, 2 requirements have to be fulfilled:(1) The growth rate…
Q: Daily Enterprises is purchasing a$9.8million machine. It will cost$46,000to transport and install…
A: Incremental earnings (net income) refers to the increase in the net income due to the acceptance of…
Q: You expect that Adidas AG will pay an annual dividend of $1.36 one year from now. You expect this…
A: Dividend For Year 1 = d1 = $1.36Growth Rate for next 5 Years = g5 = 11.5%Growth Rate after year 5 =…
Q: Barnwell Corp. purchased fifteen $1,000 6% bonds of Voltgo Corporation when the market rate of…
A: BondsBonds are a type of financial instrument that represents debt obligations issued by…
Q: Compute the cost of not taking the following trade discounts: (Use 365 days in a year. Round the…
A: The cost of not taking a discount is nothing but the rate of interest paid by the purchaser of goods…
Q: Project L requires an initial outlay at t = 0 of $35,000, its expected cash inflows are $11,000 per…
A: MIRR is one the capital budgeting techniques to evaluate the acceptability of a project. It should…
Q: The Lopez-Portillo Company has $12.1 million in assets, 90 percent financed by debt and 10 percent…
A: EPS (Earnings Per Share) is a key metric indicating the amount of profit a company generates for…
Q: The Cullumber Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like…
A: Lease option - It is an agreement that provides a renter an option to purchase the rented property…
Q: ces A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 161,000 0 55,000 1…
A: Cash Flow for Year 0 = cf0 = -$161,000Cash Flow for Year 1 = cf1 = $55,000Cash Flow for Year 2 = cf2…
need answer in step by step
Step by step
Solved in 1 steps
- Paycheck, Inc. has a beta of 1.02. If the market return is expected to be 16.90 percent and the risk-free rate is 9.90 percent, what is Paycheck’s risk premium? (Round your answer to 2 decimal places.) Paycheck's Risk Premium: ___.__%Assume the risk-free rate is 5% and the market return is 12%. If inflation increases in the market and causes the risk-free rate to increase to 6%, what will be the change to SML? Draw the original SML and the new SML in the same graph (not in two separate graphs) to show the change. If stock A’s beta is 1.6, what will be its required return before and after the change of SML?8) A public firm’s beta is 1.5. The expected market return is 5%, risk-free rate is assumed to be 1% constant. What is the expected return of the firm using CAPM?
- the risk free rate is 3% and the market premium rM rRF is 4%. stock A has a beta of 1.2, and stock B has a beta of 0.8. what is the required rate of return on each stock? assume that investors become less willing to take risk (i.e, they become more risk averse), so the market risk premium rises from 4% to 6%. Assume that the risk free rate remains constant. what effect will this have on the required rates of return on the two stocks?26. The risk-free rate of return is currently 3.5 percent, whereas the market risk premium is 9 percent. If the beta of Base Inc., stock is 1.25, then what is the expected return on Base Inc.?Company X has a beta of 1.45. The expected risk-free rate of interest is 2.5% and the expected return on the market as a whole is 10%. Using the CAPM, what is X’s expected return?
- 6. The expected return on the market is 14%; and the risk-free rate is 5%. What is the market risk premium?6-11. (Measuring risk and rates of return) a. Given the holding-period returns shown here, compute the average returns and the standard deviations for Zing Telecom and for the market. MONTH ZING TELECOM MARKET 7% 3% 2 4% 2% 3. -2% 2% 4 -4% -1% 5 5% 1% 0% 2% b. If Zing's beta is 1.67 and the risk-free rate is 5 percent, what would be an appro- priate required return for an investor owning Zing? (Note: Because the returns of Zing Telecom are based on monthly data, you will need to annualize the returns to make them compatible with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) c. How does Zing's historical average return compare with the return you lieve to be appropriate, given the firm's systematic risk? be-and the risk-free rate is 2.8 percent. market be? 7 16. Using CAPM A stock has an expected return of 10.2 percent and a beta of 91, and the expected return on the market is 10.8 percent. What must the risk-free rate be? return of 11.4
- Paycheck, Inc. has a beta of 1.19. If the market return is expected to be 13.50 percent and the risk-free rate is 6.70 percent, what is Paycheck’s risk premium? (Round your answer to 2 decimal places.)8. Given Cara's beta of 1.75 and a risk-free rate of 7 percent, what is the expected rate of return for Cara, assuming: a. a 15 percent market return? b. a 10 percent market return?the risk free rate is 13% and the market risk premium rM rRF is 4% stock A has a beta of 12, and stock B has a beta of 0.8 what is the required rate of return on each stock? assume that investors become less willing to take on risk they become more risk averse, so the market risk premium rises from 4% to 6%. assume that the risk free rate remains constant. what affect will this have on the required rates of return on the two stocks?