1. What are the characteristics of financial markets that support fair opportunities for all investors, private or institutional?
2. A project has expected cash inflows, starting with year 1, of $6,200, $9,700, $10,200 and finally in year 4, $8,000. The profitability index is 1.3 and the discount rate is 8%. What is the initial cost of the project?
a. $23,361.88 b. $28,034.26 c. $20,223.53 d. $21,564.81 e. $29,641.11
3. A firm has 4,000,000 shares of common stock outstanding, each with a market price of $12.00 per share. It has 25,000 bonds outstanding, each selling for $980. The bonds mature in 20 years, have a coupon rate of 9%, and pay coupons semi-annually. The firm's equity has a beta of 1.5, and the expected market return is 15%. The tax rate is 30% and the WACC is 15%. What is the risk-free rate?
A. 6.28%
B. 8.00%
C. 9.22%
D. 19.36%