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Risk Analysis

Stock price using CAPM and Dividend Discount Model..

Stock price at the end of the year. See attached file for full problem description. The beta of a stock is 1.2 and at the beginning of the year is selling for $55. The expected rate of return on the market portfolio is 9%, while the risk free rate of return is 3%. The stock is expected to pay a dividend of $2 at the end of t

Arbitrage Opportunity that Exists Investing

5) If the expected returns for the risk-free asset and a risky asset are 4% and 17% respectively, what percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11? 6) Discuss how the CAPM might be used in capital budgeting decisions a

Determining the required rate of return

Please help with the following problem. I have a 4 million dollar investment fund it consists of 4 stocks stock investment beta a 400000 1.50 b 600000 -0.50 c 1000000

Finance Questions

1. An investment costs $3,000 today and provides cash flows at the end of each year for 20 years. 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 through 20 (17 years)? (Assume the same

Finance

A $1,000 par value bond with a 10 year maturity date pays $35 quarterly interest. Your required rate of return is 12% with quarterly compounding. How much should you pay for this bond? 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 r

Investment Problem Cochran Corporation

3.) Cochran Corporation has a weighted average cost of capital of 11% for projects of average risk. Projects of below-average risk have a cost of capital of 9%, while projects of above-average risk have a cost of capital equal to 13%. Projects A and B are mutually exclusive, whereas all other projects are independent. None of th

Dividend Policy II

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 have a relatively high or low price-earnings ratio. a. High-risk companies. b. Companies that have recently experienced a temporary

Book Value and Fair Market Value Discussion

We discussed cash flow in DQ1. Another measure of value is the company's assets less liabilities or shareholder's equity. We call this the book value of the firm. However the actual fair market value of the firm's assets and liabilities can be far different than the book value which has important implications for valuing a firm.

Value of Bonds

8. The Bonds of Microfood, Inc. carry a 10% annual coupon, have a $1,000 face value, and nature in 4 years. Bonds of equivalent risk yield 7%. The market value of the bonds should be (assume annual compounding): a. $1,011.20 b. $1,087.25 c. $1,095.66 d. $1,101.62 e. $1,160.25

cost of capital explanation

I would be grateful for an explanation to the attached problem. Companies A and B have the same business risks and are both solely financed by equity. The retention ratio for A is 60%, while that for B is 40%. The firms are identical in all other respects, and share the following characteristics: · current earnings £37

Suppose that the following Social Security reform became law

Suppose that the following Social Security reform became law: All current Social Security recipients will continue to receive their benefits, but no increase will be made other than cost-of-living adjustments; U.S citizens between age 40 and retirement not yet on Social Security can opt to continue with the current system: those

Management

Consider the role of the finance department at Strident Marks. The finance department has a couple of new hires, and the CFO has asked that you spend a short amount of time with them, catching them up on some areas that are very important to the company at this time. These also happen to be areas for which Strident Marks does no

Outsourcing

In view of all of microeconomic concepts such as competition, markets vs Cental Command, Coarse's theorm, hidden costs, allocative efficiency, and market forces, why would it make sense to outsource a function such as human resource management?

Corporate Finance

Question 1: Assume there are two companies operating in the same industry. The two companies are almost identical. The only difference is their capital structure. Company UU has only equity while company LL has 30% of debt and 70% of equity. Further assume that both companies have the same expected net operating income of

Capital Budgeting-payback period, discounted payback, NPV, IRR

Question 1 Assume you have just been promoted junior financial manager of a company. You are very smart and are planning to be promoted in the next 2-2.5 years. An associate of your company shows you a project with the following cash flows. End of Year Cash Flows 0 -$100,000 1 $40,000 2 $40,000 3 $40,000 4 $40,000 5 -$

investigating the properties of the Black Scholes model.

Please see attached problem Option Pricing Valuing Options and investigating the properties of the Black Scholes model. The answer must be in the form of an Excel spreadsheet, with a supporting explanation to explain the working in the spreadsheet. The spreadsheet needs to show how the formulae work. It has been suggeste

CAPM

If a portfolio is on the capital market line, show that it is perfectly correlated with the market portfolio. Is its beta 1?

Compensation and the Board

Being on the Board of a company is no longer just a situation where a CEO can pack the Board with a bunch of his or her buddies from the country club (with the hope that such Board members will rubber stamp the CEO's requests). Board members are more likely to be taken to task these days for not administering the proper oversigh

Risky Assets

Please see the attached file for full problem description. --- Suppose that there is one safe and one risky asset and that the investor has initial wealth . Investing in the risky asset yields the total (principal plus interest) of x(1+r), where r is a random variable with density f(r), r where < 0 < . The safe asset p