SEC URITI" BETA
(Capital asset pricing model) Levine Manufacturing Inc. Is considering several investments In the popup window;
The rate on
Treasury bills is currentlyr 4.5 percent, and the expected return for the market is
The payback period is the number of years needed to recover the initial cash outlay
related to an investrnent. Mathematically, the payback period can be expressed
u n pa id-back al'n ount
number of years just at beginning of year
(individual or component costs of capital Compute the cost of the following:
a. A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 9 percent. A new issue would have a
oatation cost of 6 percent of the $1,135 market val
(Bond vaiuation Hamilton, Inc. bonds have a coupon rate of 12 percent. The interest is paid semiannually, and the bonds mature in 12
years. Their par value is $1,000. If your required rate of return is 9 percent, what is the value of the bond? What is the
(lRR calculation) Determine the .RR on the following projects:
a. An initial outlay of $9,000 resulting in a free cash flow of $1 ,811 at the end of each year for the next 9 years
b. An initial outlay of $9,000 resulting in a free cash ow of $2,121 at the
By denition, a common stocks value is equal to the present value of all future cash flows
expected to be received by the stockholder. In this particular case, the only future cash
flows expected to be received at the end of 1 year are a dividend of $1 .50
The current value of the stock. can be found using the following equation:
dividend in year 1 price in year 1
Value ('35) Z cfw_I + required rate of return] + (1 + required rate of return
Remember to enter the required rate of return as a decimal [not as
Review Quiz: Module 4: Chapter 8 Quiz
Score:1 of1 pt 4 30f15v II]
How is preferred stock similar to common stock?
L" A. Investors cannot sue a corporation for the non payment of dividends.
B. Preferred stock dividends and common stock dividends
Module 4: Exam 2 (Chapter 5 - 8)
lftwo rms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.
I" . false, because the required
(Future value) Sarah Wiggum would like to make a single lumpsum investment and have $1.0 million at the time of her retirement in 36
years. She has found a mutual fund that expects to earn 9 percent annually. How much must Sarah invest today? If Sarah ear
Review Quiz: Module 4: Chapter 8 Quiz
Score:1of1pt 4 1of15v II]
Which of the following statements concerning the required rate of return on stocks is true?
A. The required return on preferred stock is generally higher than the required return on c
a. A bond that has $1,000 par value cfw_face value) and a contract or coupon interest rate of 9 percent. A new issue would have a
oatation cost of 6 percent of the $1,135 market value. The bonds mature in 9 years. The rm's average tax rate is 30 percent a
Worked Solution (Financial Calculator Solution)
STEP 1: FORMULATE A SOLUTION STRATEGY
For bends making semiannual interest payments, using 5 to represent the semiannual interest
payment in period t, llrt to represent the band's maturity (or par) value,
purposes. It recently paid a dividend of $4 and the stock is currently selling for $45.
a. What is the growth rate for Dalton |nc.?
b. What is the expected return for Dalton's stock?
c. If you require a 20 percent return, should you invest in the firm?
Review Quiz: Module 5: Chapter 9 Quiz
Score: 0.33 of 1 pt 4 1 at 15 v IE] Test Score: 82.22%, 12.33 of 15 pt
@ Bookmatch 9-21 (book/static) Question Help 1:
(Diwsr'onal costs otcepi'tel and investment decisions) Saddle River Operating Company (SROC) is
Module 3: Cha-ter 6 Quiz
@ Bonus Question 6-1 (static)l
e 3: Chapter 6 Qui
r- uranmxuuman-mu -r.u-a:u=n.n.r.r.u.-_nib-SE] ct from the drol sown menu,
Q) Problem 619 (bookrstatic)
(Estimating beta From the graph below relating the holdingperiod retu
(Bond valuation ExxonMobil 15year bonds pay 10 percent interest annually on a $1000 par value. If bonds sell at $825, what is
the bonds expected rate of return?
STEP l: FORMULATE A SOLUTION STRATEGY
To determine the expected rate of return (or yield to ma
Module 3: Chatter 6 Qui4
_ q 1onsv |
Problem 5-? cfw_bookfstatim
Go to www.investopedia.coma"universityfbeginner, where there is an article on "Investing 101: Introduction." Read the article and explain what it says about risk tolerance.
(Capital asset pricing model) Levine Manufacturing Inc. is considering several investments in the popup window 55a The rate on
Treasury bills is currently 4.5 percent, and the expected return for the market is