Questions from Corporate Finance

Q: A stock has a beta of 1.15, the expected return

A stock has a beta of 1.15, the expected return on the market is 10.3 percent, and the risk-free rate is 3.1 percent. What must the expected return on this stock be?

Q: Assume a firm’s debt is risk-free, so that the cost

Assume a firm’s debt is risk-free, so that the cost of debt equals the risk-free rate, Rf. Define βA as the firm’s asset beta—that is, the systematic risk of the firm’s assets. Define βE to be the bet...

Q: Suppose a firm’s business operations are such that they mirror

Suppose a firm’s business operations are such that they mirror movements in the economy as a whole very closely; that is, the firm’s asset beta is 1.0. Use the result of Problem 21 to find the equity...

Q: Purple Feet Wine, Inc., receives an average of $17,500 in

Purple Feet Wine, Inc., receives an average of $17,500 in checks per day. The delay in clearing is typically three days. The current interest rate is .017 percent per day.a. What is the company’s floa...

Q: Your neighbor goes to the post office once a month

Your neighbor goes to the post office once a month and picks up two checks, one for $10,700 and one for $4,600. The larger check takes four days to clear after it is deposited; the smaller one takes t...

Q: Your firm has an average receipt size of $125. A

Your firm has an average receipt size of $125. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 5,100 checks per...

Q: A mail-order firm processes 5,300 checks per month. Of these,

A mail-order firm processes 5,300 checks per month. Of these, 60 percent are for $47 and 40 percent are for $79. The $47 checks are delayed two days on average; the $79 checks are delayed three days o...

Q: Frostbite Thermal wear has a zero coupon bond issue outstanding

Frostbite Thermal wear has a zero coupon bond issue outstanding with a face value of $23,000 that matures in one year. The current market value of the firm’s assets is $26,200. The standard deviation...

Q: A 15-year annuity pays $1,475 per month, and payments are

A 15-year annuity pays $1,475 per month, and payments are made at the end of each month. If the interest rate is 9 percent compounded monthly for the first seven years, and 6 percent compounded monthl...

Q: Paper Submarine Manufacturing is investigating a lockbox system to reduce

Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following:Average number of payments per day ……………………………………………………. 485Average value...