Questions from Corporate Finance

Q: The unlevered beta of electronics firms, on average, is 1

The unlevered beta of electronics firms, on average, is 1.1. The riskless rate is 6.5%, and the market risk premium is 6%. a. Estimate the expected return, using the CAPM. b. If you are a venture capi...

Q: You have been asked to analyze the capital structure of DASA,

You have been asked to analyze the capital structure of DASA, an environmental waste disposal firm, and make recommendations on a future course of action. DASA has 40 million shares outstanding, selli...

Q: Upjohn, also a major pharmaceutical company, is considering increasing its

Upjohn, also a major pharmaceutical company, is considering increasing its debt ratio from 11% to 40%, which is its optimal debt ratio. Its beta is 1.17, and the current Treasury bond rate is 6.50%. T...

Q: The following table lists returns on the market portfolio and on Microsoft

The following table lists returns on the market portfolio and on Microsoft, each year from 1989 to 1998. a. Estimate the covariance in returns between Microsoft and the market portfolio. b. Estimate t...

Q: You are trying to choose a new siding for your house.

You are trying to choose a new siding for your house. A salesman offers you two choices: a. Wood siding, which will last 10 years and cost $5,000to install and $1,000/year to maintain. b. Aluminum sid...

Q: You have just been approached by a magazine with an offer for

You have just been approached by a magazine with an offer for renewing your subscription. You can renew for one year at $20, two years for $36, or three years at $45. Assuming that you have an opportu...

Q: Safecorp, which owns and operates grocery stores across the United States

Safecorp, which owns and operates grocery stores across the United States, currently has $50 million in debt and $100 million in equity outstanding. Its stock has a beta of 1.2. It is planning a lever...

Q: Zycor Corporation obtains most of its funding internally. Assume that the

Zycor Corporation obtains most of its funding internally. Assume that the stock has a beta of 1.2, the riskless rate is 6.5%, and the market risk premium is 6%. a. Estimate the cost of internal equity...

Q: Tech Products reported a net loss of $80 million for the

Tech Products reported a net loss of $80 million for the latest financial year. In addition, the firm reported a net capital expenditure of $70 million and a change in non- cash working capital of $10...

Q: Novell, which had a market value of equity of $2

Novell, which had a market value of equity of $2 billion and a beta of 1.50, announced that it was acquiring Word- Perfect, which had a market value of equity of $1 billion and a beta of 1.30. Neither...