1. What is the cash flow from a firm's operating activities given the following:
The firm paid back $75,000 in loans
The firm paid $20,000 in interest
The firm paid $40,000 in dividends
The firm issued $120,000 in new shares (new equity)
2. Elephant Company common stock has a beta of 1.5. The risk-free rate is 5 percent and the expected market rate of return is 15 percent. Determine the required rate of return on the security. Show work.
a. 25.2% b. 18.4% c. 20.00% d. 16.00%