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Why is there a difference between the book value and market value ? After all if you buy all the stock aren't you simply buying the total assets and assuming the total liabilities of the firm?
For each of the following four groups of companies, state whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to hav
Projects A and B are mutually exclusive, whereas all other projects are independent. None of the projects will be repeated. The following table summarizes the cash flows, internal rate of return (IR
That is a reasonable question, and would require differentiating between whether business performance drives CEO compensation, or whether better compensated CEOs drive better business performance.
The growth rate of Campbell Company is expected to be 4% for 1 year, 5% the next year, then 6 % for the following year and then the growth rate is expected to continue at 7%. The company paid a divi
The investment's expected return is 10 percent. The projected cash flows for years 1, 2, 3 are $100, $200, and $300 respectively. What is the annual cash flow received for each of the years 4 throug
The market required rate of return is 14 percent and the risk free rate is 6 percent, how do I determine the fund's required rate of return.
Discuss how the CAPM might be used in capital budgeting decisions and utility rate decisions.
Construct a decision tree and determine whether the Beauty Company should introduce the new beauty cream or use its funds to purchase Treasury bills.
The rate of return on perfectly safe Treasury Bills is 2%. Your client chooses to invest $70,000 of her portfolio in your equity fund and $30,000 in T-bills. What is the expected return and standard
1) If you wanted to invest in Stocks A and B in such a way as to minimize risk, what weights should you put on the two stocks? 2) What would the portfolio expected return and standard deviation be for
Can write what government did to reduce the 3 types of unemployment or to maintain the 3 types of unemployment. Always relate back to the 3 types of unemployment.
If you go long, what is your expected outcome per share? What is the most you can make by going short? If you were mildly risk averse, would you choose going long or short?
Problem: The risk-free rate is again 3%. The expected return on the market is 9%. A particular security offers an expected return of 2 percent. Assuming that capital markets are in equilibrium, what
a. What is the arithmetic mean return of the two stocks? b. What's their geometric mean return? c. Which one would you rather have bought, in retrospect? Why?
1) If you are an expected-return maximizer, what action would you prefer? Show why. 2) If your basis for preferring an action is to minimize risk, which action would you prefer? Why? 3) Dr
Suppose Congress (in an attempt to stimulate the economy in both the short and long run) passes an investment-tax credit designed to increase domestic investment.
If the company uses Marvin Barnes's approach, how much larger will the capital budget be than if it uses Tom Floods approach?
Determine what fiscal policy measure has a more direct impact to the economy. Is it an increase in government spending or an equal decrease in taxes if consumer confidence is lower than the previous
Brandon Inc. consists of 2 divisions of equal size, and Brandon is 100 percent equity financed. Division A cost of equity capital is 9.8 percent, while Division B cost of equity capital is 14 percen
In times of a struggling economic situation, determine the key steps that the Federal Reserve should take to help stabilize the economy. Next, explain how your proposed steps will affect money suppl
Assuming that Phoenix is not expected to pay any dividends during the coming year, determine the expected rate of return on Phoenix Stock.
When you consider state and local spending on highways, where does it fall in GDP? How important is state and local spending when compared to total GDP?
With this in mind, explain a company's cost of capital and how it is calculated. What is marginal cost of capital and how does it differ from weighted average cost of capital?
The certainty equivalent approach to accounting for risk in capital budgeting involves: