Questions from Corporate Finance

Q: Refer to Table 10.1(given below) in the

Refer to Table 10.1(given below) in the text and look at the period from 1973 through 1978. a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. b. Calc...

Q: Consider the following information: / a.

Consider the following information: a. What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 20 percent each in A and B,...

Q: There are two stock markets, each driven by the same common

There are two stock markets, each driven by the same common force, F, with an expected value of zero and standard deviation of 10 percent. There are many securities in each market; thus, you can inves...

Q: The Starr Co. just paid a dividend of $1.

The Starr Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. If investors require a return of 11 per...

Q: Filer Manufacturing has 8.3 million shares of common stock outstanding

Filer Manufacturing has 8.3 million shares of common stock outstanding. The current share price is $53, and the book value per share is $4. The company also has two bond issues outstanding. The first...

Q: If you can borrow all the money you need for a project

If you can borrow all the money you need for a project at 6 percent, doesn’t it follow that 6 percent is your cost of capital for the project?

Q: KIC, Inc., plans to issue $5 million of bonds

KIC, Inc., plans to issue $5 million of bonds with a coupon rate of 8 percent and 30 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest rate o...

Q: Star, Inc., a prominent consumer products firm, is debating

Star, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 35 percent debt. Currently there are 6,000 shares outstanding and...

Q: Good Time Company is a regional chain department store. It will

Good Time Company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 60 percent and the probability of a recession is 40 percent. It...

Q: Suppose the following two independent investment opportunities are available to Relax,

Suppose the following two independent investment opportunities are available to Relax, Inc. The appropriate discount rate is 8.5 percent. a. Compute the profitability index for each of the two proje...