1.The Muggle Co. has just paid a dividend of $1 per share. The dividends are expected to grow at 20% per year for the next three years and at the rate of 5% per year thereafter. If the required rate of return on the stock is 15%(APR), what is the current value of the stock?

The firm has only twenty million to invest. What is the maximum NPV that the company can obtain?

3.Stock A has an expected return of 20% and Stock B has an expected return of 12%. The risk of stock A as measured by the variance is three times that of stock B. If the correlation coefficient between the two stocks is zero, what proportion of investment in each stock gives the minimum portfolio variance (minimum risk)?

4.The historical returns data for the past three years for Stock B and the stock market portfolio are:
Stock B: 24%, 0%, 24%, Market Portfolios: 10%, 12%, 20%.

a. Calculate the expected return for Stock B and the market portfolio.
b. Calculate the variance in the market.
c. Calculate the covariance of returns between Stock B and the market portfolio.
d. Calculate the beta for Stock B.
e. If the risk-free rate is 4%, calculate the market risk premium.
f. Calculate the required rate of return (cost of equity) for Stock B using CAPM.

5.If a firm borrows $25 million for one year at an interest rate of 10%, what is the present value of the interest tax shield? Assume a 35% tax rate.

6.The Basilisk Company has total assets of $30 million, of which $10 million are financed by debt and $20 million by equity. The EBIT (earnings before interest and tax) is $6 million. If the firm's tax rate is 34%, and the interest rate on debt is 10%, calculate its after-tax cash flow.

7.Suppose that a company can direct $1 to either debt interest...

...Chapter 6: Discussion Question #4 (p. 223)
4. Why is it usually easier to forecast sales for seasoned firms in contrast with early-stage ventures?
Typically, it is easier to forecast a seasoned firm’s sales to that of an early-stage venture because the seasoned firm will have an operational history. Basing current sales on historical data is easier to do than trying to estimate sales based on little to no historical data to benchmark from. If you are a start-up / early-stage venture...

...Федеральное государственное бюджетное образовательное учреждение высшего профессионального
образования
РОССИЙСКАЯ АКАДЕМИЯ НАРОДНОГО ХОЗЯЙСТВА И ГОСУДАРСТВЕННОЙ
СЛУЖБЫ ПРИ ПРЕЗИДЕНТЕ РФ
ИНСТИТУТ БИЗНЕСА И ДЕЛОВОГО АДМИНИСТРИРОВАНИЯ
ФАКУЛЬТЕТ МЕЖДУНАРОДНОГО БИЗНЕСА И ДЕЛОВОГО АДМИНИСТРИРОВАНИЯ
Groupe Ariel S.A. Case
Artyom Kirillov
Polina Dzyuba
Moscow
2011
Groupe Ariel S.A. : Parity Conditions and Cross-Border Valuation
Question 1
There are two ways to compute the...

...Fin 350 Exam 2, Fall 2010 Name ___________________________
This has answers to the problems which I believe, but cannot guarantee, are correct.
1. Under certain conditions, a particular project may have more than one IRR. One condition under which this situation can occur is if, in addition to the initial investment at time = 0, a negative cash flow occurs at the end of the project's life.
a. True
b. False
2. The modified IRR (MIRR) method has wide appeal to...

...Congoleum Corporation
Executive Summary
In valuing the target company Congoleum after an LBO by First Boston found the expected free cash flows generated by this firm from 1980 to 1984. These numbers were based on values provided in the case. From there, we employed the Adjusted Present Value method to discount these cash flows because we assumed that Congoleum was varying its Debt to Equity ratio during those years. We discounted these cash flows by the required return on assets that was...

...P = price V = variable cost Fc = fixed cost t = time in yrs
Chapter 11 quiz
Q , P , V , FC (based-plan, lower, upper) DEP = F0Costs / # yr’s
Based price for (Q , P , V , FC) multiply them each by WITHIN 10%, .10 than add, subtract
Best case +P, +Q, -V, -FC Worst case –P, -Q, +V, +FC
Best case scenario: OFC = [(Q+ x P+) – (Q+ x V-) – FC- – DEP] (1 - TAX RATE) +DEP high rev, low cost
Worst case scenario: OCF= [(Q- x P-) – (Q- x V+) – FC+ – DEP] (1 - TAX RATE) +DEP high cost,...

...would increase the likelihood that a company would increase its debt ratio, other things held constant?
Answer
An increase in costs incurred when filing for bankruptcy.
An increase in the corporate tax rate.
An increase in the personal tax rate.
534 FIN QUIZ 10 (CHAPTER 17)
Question 1 2 out of 2 points
Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420...

...(No*Po) = $4,560,000
(2) – (1): NoPo = $3,810,000, Po = (3810000/125,000) = $30.48
Use the following Balance Sheet information to answer the next question:
XYZ Corp.
Current Assets $16,000 Current Liabbilities $8,000
Net Fixed Assets $24,000
Equity $32,000
Toral Assets $40,000 Total Liab. & Eq. $40,000
ABC Corp.
Current Assets $1,500 Current Liabilities $1,500
Net Fixed Assets $4,500
Equity $4,500
Toral Assets $6,000 Total...

...UNIVERSITY OF ILLINOIS AT CHICAGO
FINANCE 431 – MANAGEMENT IN THE FINANCIAL SERVICES INDUSTRY
PRACTICE SET 1 – BANK CAPITAL PROJECTS AND LEASE FINANCING
Note: Problems 1,3,5,7 are from Chapter 4 in the textbook.
1. A group of businesspeople from Gwynne Island are considering filing an application with the state banking commission to charter a new bank. Due to a lack of current banking facilities within a 10-mile radius of the community, the organizing group estimates...

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