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Economics, Public Finance
Year 4
Managerial Finance: Calculating how much should be paid for a stock.
Anybody Coal Co. expects tough economic conditions for the foreseeable future. Their current beta is 1.2, the risk-free rate is 10% and the required rate of return on the market is 15%. Anybody paid a dividend of $4 today. Analysts are predicting a steady decline of 6% per year in dividends for the foreseeable future. What is the most you would be willing to pay for this stock?
a) $0
b) $42.40
c) $44.94
d) $17.09
e) $25.00
By OTA: We Lin Kerk, MHRM
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Managerial Finance: Calculating the weighted average cost of capital. - A company's pre-tax cost of debt is 10%. Their preferred stock pays a $10 dividend and sells for $100. Common stock is selling for $50 and the next expected dividend will be $3. The dividend growth rate on common stock is 8%. The company's tax rate is 30% and their capital structure is:
Debt: 50%
...
Managerial Finance - Present value - Apox. Corp. expects to receive $2,000 per year for 10 yrs and then $3,500 per year for the next 10 years. What is the present value of this 20-yr cash flow at 11%? Please show the work. (Answer choices are $19,033; $27,870; and $32,389) So which is it?
Managerial Finance: Calculating the expected return and beta of a portfolio after buying a new stock. - You have a portfolio with a total value of $9,000 which has an expected return of 12% with a beta of 1.2. You plan to buy $1,000 of a stock with an expected return of 20% and a beta of 2.0. What will be the expected return and beta of the portfolio after purchasing the new stock?
a) 12.0%, ...
Calculating the required rate of return. - The assets of a particular investment fund are:
Stock A with an Investment of $200,000 and a beta of 1.50. Stock B with an Investment of $300,000 and a beta of -0.50. Stock C with an Investment of $500,000 and a beta of 1.25. Stock D with an Investment of $1,000,000 and a beta of 0.75.
The required market rate of return is 15% and the risk-free rate...
Managerial Finance: Calculating the expected rate of return. - Shady Dealings Co. has a beta of 0.7 and a required rate of return of 15%. The market risk premium is currently 5%. If we expect the inflation premium to increase by 2% and Shady Dealings to acquire assets which will increase its beta to 1.05, what will be Shady Dealings' new required rate of return?
a) 13.5%
b) 22.8%
c) 18.75%
...
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