Probability 0.1 0.2 0.4 0.2 0.1 Firm A: EPS, Firm B: EPS, Firm C: EPS, ($1.50) $1.80 $8.40 $11.70 (1.20) $5.10 4.20 1.50 6.90 9.60 (2.40) 1.35 5.10 8.85 12.60

Consider a firm with a beta of 1.57. If the market return is 6.73% and the risk-free rate is 0.90%, what is the firm's expected return according to the capital asset pricing model? Round your answer to four decimal places, e.g., enter 12.34 for 12.34%.

Answer the following a) When will the different DCF methods use the same discount rate? b) The cost of debt (ka) will change as the capital structure of a firm changes. Why or why not? c) Why does the cost of equity (k.) increase as the amount of debt in the capital structure of a firm increases? Why? d) Freebie Inc.'s common stock has a beta of 1.3. If the risk-free rate is 4.5% and the expected return on the market is 12%, what is its cost of equity capital? e) Why do branded food companies command the highest EBIT multiple (about 8) and transportation companies the lowest (about 3)? f) Should a firm use its cost of capital as a hurdle/discount rate to value all internal divisions? Why or why not? g) An option can have more than one source of value. Consider a mining company. The company can mine for ores today or wait another year (or more) to mine. What real options can you identify here? h) Do you consider dividend payments by the firm in calculating cash flows? Why or why not? i)…

The Expected Rate of Profit Formula looks at:     A. Expected Profit & Money Invested   B. Common Stock & Preferred Stock   C. Expected Profit & Bonds   D. All of the above

XYZ has a beta coefficient of 1.76. Estimate its cost of equity if the risk-free rate is 8% and return on the broad market index is 16%. Calculate the cost of equity.

Consider a company which has current trailing earnings of 6.8 per share. The expected ROE is 0.141. The required rate of return is 0.13. If the firm has a plowback ratio of 0.3, its intrinsic value using the DDM should be: 54.11 59.74 51.03 56.57 47.49

You are thinking about investing in either X corp, or Y corp. Based on the following market measures, which company could be the best option based on possible return of investment?   x y Price/Earnings Ratio 10.39 12.27 Earnings per Common Share 3.5 5.4 Divident Payout .464 .320

The.. value.. of.. an.. ordinary.. share..Select one or more:a. Will fall if future profit forecasts are higher than expectedb. Is always at its fundamental valuec. Can rise and fall along with market sentimentd. Will rise if a firm introduces some cost saving innovation

Total investment risk can be broken down into two types of risk. What are these two types of risk and which should NOT affect expected return? (b) A firm has a beta of 1.3. The expected market return is 12% and the risk-free rate is 2%. What should be the firm's equity cost of capital? Use CAPM

3. Price/earnings ratios are ____ for firms with ____ expected earnings and ____ expected required ratesof return.a. higher; higher; higherb. lower; lower; lowerc. higher; lower; higherd. higher; higher; lowere. higher; lower; lower