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Question
The excess return if the difference between the average return on a security and the average return for:A) Treasury Bonds.
B) a portfolio of securities with similar risk.
C) a broad based market portfolio like the S&P 500 index.
D) Treasury Bills.
Answer
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Related questions
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Nielson Motors has a debt-equity ratio of 1.8, an equity beta of 1.6, and a debt beta of 0.20. It is currently evaluating the following projects, none of which would change Nielson's volatility. Project
1
2
3
4
5 Investment
100
75
120
60
80 NPV
23
12
18
15
14 (All amounts are in $millions.)
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Nielson Motors has a debt-equity ratio of 1.8, an equity beta of 1.6, and a debt beta of 0.20. It is currently evaluating the following projects, none of which would change Nielson's volatility. Project
1
2
3
4
5 Investment
100
75
120
60
80 NPV
23
12
18
15
14 (All amounts are in $millions.)
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Q:
Luther Industries has no debt and expects to generate free cash flows of $48 million each year. Luther believes that if it permanently increases its level of debt to $100 million, the risk of financial distress may cause it to lose some customers and receive less favorable terms from its suppliers. As a result, Luther's expected free cash flows with debt will be only $44 million per year. Suppose Luther's tax rate is 40%, the risk-free rate is 6%, the expected return of the market is 14%, and the beta of Luther's free cash flows is 1.25 (with or without leverage).
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Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year. You expect Von Bora's stock price to be $25.00 at the end of two years. Von Bora's equity cost of capital is 10%. Suppose you plan on purchasing Von Bora stock in one year, right after the $1.40 dividend is paid. You then plan on selling your stock at the end of year two, right after the $1.50 dividend is paid. The dividend yield that you will receive on your investment is closest to: A) 5.75% B) 6.50% C) 6.25% D) 4.00%
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Q:
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Consider the following average annual returns:InvestmentAverage ReturnSmall Stocks23.2%S&P 50013.2%Corporate Bonds7.5%Treasury Bonds6.2%Treasury Bills4.8% What is the excess return for the S&P 500? A) 5.7% B) 7.0% C) 0% D) 8.4%
Q:
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Q:
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JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to: A) $25.00 B) $15.00 C) $31.25 D) $27.50
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Which of the following formulas is INCORRECT?A) g = retention rate x return on new investmentB) Divt = EPSt x Dividend Payout RateC) P0 = D) rE = - g
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Glucose Scan Incorporated (GSI) currently sells its latest glucose monitor, the Glucoscan 3000, to diabetic patients for $129. GSI plans on lowering their price next year to $99 per unit. The cost of goods sold for each Glucoscan unit is $50, and GSI expects to sell 100,000 units over the next year. Suppose that if GSI drops the price on the Glucoscan 3000 immediately, it can increase sales over the next year by 30% to 130,000 units. Also suppose that for each Glucoscan monitor sold, GSI expects additional sales of $100 per year on glucose testing strips and these strips have a gross profit margin of 75%. Considering the increase in the sale of testing strips, the incremental impact of this price drop on the firms EBIT is closest to: A) a decline of 1.5 million. B) a decline of 0.7 million. C) an increase of 0.7 million. D) an increase of 1.5 million.
Q:
Money that has been or will be paid regardless of the decision whether or not to proceed with the project is: A) cannibalization. B) considered as part of the initial investment in the project. C) an opportunity cost. D) a sunk cost.