Questions from Financial Management

Q: Suppose rRF = 9%, rM = 14%, and bi =

Suppose rRF = 9%, rM = 14%, and bi = 1.3. a. What is ri, the required rate of return on Stock i? b. Now suppose that rRF (1) Increases to 10% or (2) Decreases to 8%. The slope of the SML remains con...

Q: Assume that you have just been hired as a financial analyst by

Assume that you have just been hired as a financial analyst by Tropical Sweets Inc., a midsized California company that specializes in creating exotic candies from tropical fruits such as mangoes, pap...

Q: Hart Enterprises recently paid a dividend, D0, of $1

Hart Enterprises recently paid a dividend, D0, of $1.25. It expects to have non constant growth of 20% for 2 years followed by a constant rate of 5% thereafter. The firm’s required return is 10%. a. H...

Q: Here is the condensed 2008 balance sheet for Skye Computer Company (

Here is the condensed 2008 balance sheet for Skye Computer Company (in thousands of dollars): Skye’s earnings per share last year were $3.20, the common stock sells for $55.00, last...

Q: A mutual fund manager has a $20 million portfolio with a

A mutual fund manager has a $20 million portfolio with a beta of 1.5. The risk-free rate is 4.5%, and the market risk premium is 5.5%. The manager expects to receive an additional $5 million, which sh...

Q: Coleman Technologies is considering a major expansion program that has been proposed

Coleman Technologies is considering a major expansion program that has been proposed by the company’s information technology group. Before proceeding with the expansion, the company must estimate its...

Q: It is a fact that the federal government (1)

It is a fact that the federal government (1) Encouraged the development of the savings and loan industry, (2) Virtually forced the industry to make long-term fixed-interest-rate mortgages, and (3)...

Q: Smith Technologies is expected to generate $150 million in free cash

Smith Technologies is expected to generate $150 million in free cash flow next year, and FCF is expected to grow at a constant rate of 5% per year indefinitely. Smith has no debt or preferred stock, a...

Q: Klose Outfitters Inc. believes that its optimal capital structure consists of

Klose Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansio...

Q: Midwest Electric Company (MEC) uses only debt and common equity

Midwest Electric Company (MEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for...