EBK CONTEMPORARY ENGINEERING ECONOMICS
6th Edition
ISBN: 8220101336736
Author: Park
Publisher: PEARSON
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Chapter 13, Problem 15P
To determine
Calculate the license value.
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Apex is a media company that is considering expanding into streaming services.
Apex has a levered beta of 0.80 and a debt to capital ratio (D/(D+E)) of 20%.
The unlevered beta for streaming service companies is 1.10 and Apex plans to use its existing debt ratio in funding the business.
Apex’s effective tax rate is 30% but the marginal tax rate is 40%.
Apex is rated A, and the default spread for A rated firms is 2%.
You can assume that the riskfree rate is 3% and the equity risk premium is 6%
Estimate the cost of capital you would use in doing a project analysis of the streaming service investment
Which of the following statements is incorrect?(a) Holding on to cash is the most risk-free investment option.(b) To maximize your return on total assets (ignoring financial risk), you mustput all your money into the same type of investment category.(c) Diversification among well-chosen investments can reduce market volatility.(d) Broader diversification among well-chosen assets always leads to a higherreturn without increasing additional risk.
Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $92,000. The expected rate of return on this tool is
15 percent.
85 percent.
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10 percent.
Chapter 13 Solutions
EBK CONTEMPORARY ENGINEERING ECONOMICS
Ch. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Prob. 6PCh. 13 - Prob. 7PCh. 13 - Prob. 8PCh. 13 - Prob. 9PCh. 13 - Prob. 10P
Ch. 13 - Prob. 11PCh. 13 - Prob. 12PCh. 13 - Prob. 13PCh. 13 - Prob. 14PCh. 13 - Prob. 15PCh. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 1STCh. 13 - Prob. 2STCh. 13 - Prob. 3STCh. 13 - Prob. 4ST
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