Questions from Corporate Finance

Q: Williamson, Inc., has a debt–equity ratio of 2

Williamson, Inc., has a debt–equity ratio of 2.3. The firm’s weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. The tax rate is 35 percent. a. What is the compan...

Q: A company has a single zero coupon bond outstanding that matures in

A company has a single zero coupon bond outstanding that matures in 10 years with a face value of $10 million. The current value of the company’s assets is $9.05 million, and the standard deviation of...

Q: Butler International Limited is evaluating a project in Erewhon. The project

Butler International Limited is evaluating a project in Erewhon. The project will create the following cash flows: All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to...

Q: The efficient market hypothesis implies that all mutual funds should obtain the

The efficient market hypothesis implies that all mutual funds should obtain the same expected risk-adjusted returns. Therefore, we can simply pick mutual funds at random. Is this statement true or fal...

Q: Consider Pacific Energy Company and U.S. Bluechips, Inc

Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $630,000. Without new projects, both firms will continue to generate earnings of $630,000 in perpetuity. As...

Q: Office Automation, Inc., must choose between two copiers, the

Office Automation, Inc., must choose between two copiers, the XX40 or the RH45. The XX40 costs $1,499 and will last for three years. The copier will require a real aftertax cost of $120 per year after...

Q: Consider a project to supply Detroit with 25,000 tons of

Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $2,700,000 investment in threading equipment to get the project sta...

Q: : You’ve just found a 10 percent coupon bond on the market

You’ve just found a 10 percent coupon bond on the market that sells for par value. What is the maturity on this bond?

Q: An investment project provides cash inflows of $790 per year for

An investment project provides cash inflows of $790 per year for eight years. What is the project payback period if the initial cost is $3,200? What if the initial cost is $4,800? What if it is $7,300...

Q: Based on the following information, calculate the expected return and standard

Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks...