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- Can someone give an example or scenario about the following: 1. Capital Asset Pricing Model2. Market Risk premium3. Risk free rate4. Security market line5. Systematic riskDistinguish between beta (i.e., market) risk, within-firm (i.e., corporate) risk,and stand-alone risk for a potential project. Of the three measures, which istheoretically the most relevant, and why?Which of the following is needed to calculate a firm’s WACC? A. the cost of carrying inventory B. the amount of capital necessary to make the investment C. the cost of preferred stock D. the probability distribution of expected returns E. both b and c
- MT480M4-4: Assess investment options based upon cost of capital and expected returns. The assessment requires the application of the net present value (NPV) model to assess investment options given cost of capital, commonly referred to as discount rates, and required rates of returns. You will explain the role of a discount rate in evaluating the NPV model and compare investment options as cost of capital increases or decreases. The use of a financial calculator and/or Excel will be required for this part of the assessment. Read the scenario and address all of the checklist items. Scenario: A new product manager presents to you, the chief financial officer, a proposal to expand operations that includes the purchase of a new machine. The product manager is certain that the positive cash flows, which exceed the initial outlay by $20,000 by the end of Year 4, will bring both praise and approval. You explain the company uses a 12% discount rate for cash flows and project-related budgeting.…Q3. Elaborate the following statements: A. Portfolio return is a linear combination of individual securities whereas portfolio risk is nonlinear.B. Portfolio Management is primarily a risk diversification tool.C. Financial Contracts are those which give simultaneous rise to the financial assets of one entity and financial liability or equity of another entity.D. Investment decision refers to the selection and acquiring the resources whereas financing decision refers to the arrangement of funds to acquire selected resources.Using the NPV index approach to ranking projects, which projects should the firm accept? A. 1, 6, 5 and 3 B. 1, 2, 3, and 5 C. 2, 3, 4, and 6 D. 1, 3, 4, and 6
- Define each of the following terms: d. Stand-alone risk; corporate (within-firm) risk; market (beta) riskQ1. Demonstrate how holding an equally-weighted portfolio that combines financial and non-financial assets could be beneficial to a risk-averse investor. Explain the reasoning behind this strategy.D3 Explain the concept of the efficient frontier. In addition, outline the relationship between the capital allocation line (CAL) and the efficient frontier, and explain the uses of the CAL in portfolio management.?
- A.Briefly explain the concept of the efficient market hypothesis (EMH) and each of its three forms and briefly discuss the degree to which existing empirical evidence supports each of the three forms of the EMH.b. Briefly discuss the implications of the efficient market hypothesis for investment policy as it applies to technical analysisDescribe how the business risk and financial risk could be included in the value of WACC, which is calculated with the formula: WACC=Wd*Rd*(1-Tc)+We*ReQ4. Describe the typical organization of a buyout fund.