Questions from Corporate Finance

Q: You have been asked to estimate a Markowitz portfolio across a universe

You have been asked to estimate a Markowitz portfolio across a universe of 1,250 assets. a. How many expected returns and variances would you need to compute? b. How many covariances would you nee...

Q: The following is a regression of dividend payout ratios on the risk

The following is a regression of dividend payout ratios on the risk and ln(market capitalization: in millions) of chemical firms: Dividend Payout Ratio = 0.14 + 0.05 [ln(Market Capitalization in Mi...

Q: You are a small business owner considering two alternatives for your phone

You are a small business owner considering two alternatives for your phone system. The discount rate is 8%. Which alternative would you pick?  

Q: Sunshine Media has just completed an IPO, where 50 million shares

Sunshine Media has just completed an IPO, where 50 million shares of the 125 million shares outstanding were issued to the public at an offering price of $22 per share. On the offering date, the sto...

Q: You have been asked to analyze the standard deviation of a portfolio

You have been asked to analyze the standard deviation of a portfolio composed of the following three assets: You have also been provided with the correlations across these three investments:...

Q: You are the manager of a pharmaceutical company and are considering what

You are the manager of a pharmaceutical company and are considering what type of laptop computers to buy for your salespeople to take with them on their calls. • You can buy fairly inexpensive (and l...

Q: United Airlines has a beta of 1.50. The standard

United Airlines has a beta of 1.50. The standard deviation in the market portfolio is 22% and United Airlines has a standard deviation of 66%. a. Estimate the correlation between United Airlines an...

Q: National City, a bank holding company, reported earnings per share

National City, a bank holding company, reported earnings per share of $2.40 and paid dividends per share of $1.06. The earnings had grown 7.5% a year over the prior five years, and were expected to...

Q: You are using the multifactor model to estimate the expected return on

You are using the multifactor model to estimate the expected return on Emerson Electric and have derived the following estimates for the factor betas and risk premia: With a riskless rate of 6%...

Q: You are stockholder in a SmallTech, a company that is planning

You are stockholder in a SmallTech, a company that is planning to raise new equity. The stock is trading at $15 per share, and there are 1 million shares outstanding. The firm issues 500,000 rights...