Questions from Financial Management

Q: Harley Motors has $10 million in assets, which were financed

Harley Motors has $10 million in assets, which were financed with $2 million of debt and $8 million in equity. Harley’s beta is currently 1.2, and its tax rate is 40%. Use the Hamada equation to find...

Q: Axel Telecommunications has a target capital structure that consists of 70%

Axel Telecommunications has a target capital structure that consists of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $3,000,000. If Axel repor...

Q: Assume that the risk-free rate is 5% and the

Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the expected return for the overall stock market? What is the required rate of return on a stock with a beta of 1.2?

Q: The probability distribution of a less risky expected return is more peaked

The probability distribution of a less risky expected return is more peaked than that of a riskier return. What shape would the probability distribution be for (a) Completely certain returns and (b...

Q: Stock A has an expected return of 7%, a standard deviation

Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of –0.3, and a beta coefficient of –0.5. Stock B has an expected return...

Q: Why do U.S. corporations build manufacturing plants abroad when

Why do U.S. corporations build manufacturing plants abroad when they can build them at home?

Q: Thomas Brothers is expected to pay a $0.50 per

Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year (that is, D1 = $0.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of retur...

Q: Harrison Clothiers’ stock currently sells for $20.00 a share

Harrison Clothiers’ stock currently sells for $20.00 a share. It just paid a dividend of $1.00 a share (that is, D0 = $1.00). The dividend is expected to grow at a constant rate of 6% a year. What sto...

Q: Fee Founders has perpetual preferred stock outstanding that sells for $60

Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return?

Q: What will be the nominal rate of return on a perpetual preferred

What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 8% of par, and a current market price of (a) $60, (b) $80, (c) $100, and (d) $140...