1. Company A has a beta of 0.8, while Company B's beta is 1.6. The required return on the stock market is 10.00%, and the risk-free rate is 2.25%.
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<br/><br/>1. Company A has a beta of 0.8, while Company B's beta is

1.6. The required return on the stock market is 10.00%, and the risk-free rate is 2.25%. Which of the following statements is true?


a.     Stock B's required return is double that of Stock A's.
b.    If the marginal investor becomes less risk averse, the required return on Stock A will increase equally with the required return on Stock B.
c.     When held separately, as a stand-alone investment, Stock B has more risk than Stock A.
d.    The required rate of return on each Company's stock will increase exactly by an amount equal to the increase in the market risk premium.
e.     None of the above.




2. The last dividend paid by Grand Inc. was $2.65. The dividend growth rate is expected to be constant at 4% for 3 years, after which dividends amount is expected to remain constant for years ahead. If the firm's required return (rs) is 14%, what is its current stock price?




3. Is it true? Explain. The higher risk aversion of the market participants, the higher is the required rate of return on stocks.
















4. Which of the following statements is CORRECT?


a.     If a company is not publicly traded, it is not possible to estimate its WACC.
b.    Target capital structure assumes that the WACC should be based on the book value of sources of financing and their weights according to the balance sheet of the company.
c.     WACC is not estimated for sources of financing that do not have a market value.
d.    The bond-yield-plus-risk-premium approach is the most sophisticated and objective method for estimating a firm's cost of equity capital.
e.     The cost of the source of financing retained earnings is based on the required rate of return on company's stocks.






5. Ann holds the following investment portfolio:


Stock Investment Beta
A $250,000 0.40
B $80,000 1.80
C $110,000 1.15



Ann plans to sell Stock A and replace it with Stock E, which has a beta of 0.85. By how much will the portfolio beta change?
















6. Assume that you are on the financial staff of Gregory Inc., and you have collected the following data: The yield on the company's outstanding bonds is 4.5%; its tax rate is 35%; the next expected dividend is $3.47 a share; the dividend is expected to grow at a constant rate of 4.00% a year; the price of the stock is $56.00 per share; the flotation cost for selling new shares is F=6%; and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget?




7. Which if the following statements is CORRECT?


a.     Blockchain technology helps to issue tokens, that give their holders the right to exchange them for digital currencies - evidence of the debt interest in the company.
b.    Issue of tokens could be regulated as securities issue, and is subject to registration in order to be traded at the organized exchange.
c.     ADRs of the level 2 are issued in order to place new shares among qualified institutional buyers.
d.    Private equity funds invest only in non-public companies in order to take control over the company's assets.




8. Explain the following: Cryptocurrency does not have inherent value. 

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