Financial Management: Theory & Practice (MindTap Course List)
15th Edition
ISBN: 9781305632295
Author: Eugene F. Brigham, Michael C. Ehrhardt
Publisher: Cengage Learning
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Chapter 15, Problem 13SP
Summary Introduction
To determine: Weighted average cost of capital and firm’s optimal capital structure.
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Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively.
b. Find the risk-free rate for a firm witha required return of 14.363% and a beta of 1.07 when the market return is 14%.
C. Find the market return for an asset with a required return of 9.045% and a beta of 1.57 when the risk-free rate is 3%.
d. Find the beta for an asset with a required return of 10.255% when the risk-free rate and market return are 6% and 9.7%, respectively.
a. The required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively, is %.
Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 1.65 when the risk-free rate and market return are 8% and 14%, respectively.
b. Find the risk-free rate for a firm with a required return of 11.366% and a beta of 1.29 when the market return is 10%.
c. Find the market return for an asset with a required return of 7.711% and a beta of 0.89 when the risk-free rate is 4%.
d. Find the beta for an asset with a required return of 6.552% when the risk-free rate and market return are 6% and 8.4%, respectively.
a) What is the similarity between the internal rate of return of a project and the yield-to-maturity
of a bond?
b) "If a stock had high returns so far, it will have low returns in the future". Discuss whether this
statement is true or false, based on the knowledge of the different theories and models out
there.
c) A salt sprinkler manufacturer considers making an investment in a ball-point pen factory.
Explain how
you
would evaluate this investment project and discuss the appropriate discount
rate to use.
d) Explain how you could earn a positive return by following a momentum strategy.
Chapter 15 Solutions
Financial Management: Theory & Practice (MindTap Course List)
Ch. 15 - Prob. 1QCh. 15 - What term refers to the uncertainty inherent in...Ch. 15 - Firms with relatively high nonfinancial fixed...Ch. 15 - “One type of leverage affects both EBIT and EPS....Ch. 15 - Why is the following statement true? Other things...Ch. 15 - Why do public utility companies usually have...Ch. 15 - Why is EBIT generally considered to be independent...Ch. 15 - If a firm went from zero debt to successively...Ch. 15 - Prob. 9QCh. 15 - Prob. 1P
Ch. 15 - Prob. 2PCh. 15 - Ethier Enterprise has an unlevered beta of 1.0....Ch. 15 - Nichols Corporations value of operations is equal...Ch. 15 - Lee Manufacturings value of operations is equal to...Ch. 15 - Dye Trucking raised $150 million in new debt and...Ch. 15 - Schweser Satellites Inc. produces satellite earth...Ch. 15 - Prob. 8PCh. 15 - Prob. 9PCh. 15 - Beckman Engineering and Associates (BEA) is...Ch. 15 - Prob. 11PCh. 15 - A. Fethe Inc. is a custom manufacturer of guitars,...Ch. 15 - Prob. 13SPCh. 15 - Prob. 1MCCh. 15 - Prob. 2MCCh. 15 - Prob. 4MCCh. 15 - Prob. 5MCCh. 15 - Prob. 6MCCh. 15 - Prob. 7MCCh. 15 - Prob. 10MCCh. 15 - Prob. 11MCCh. 15 - Prob. 12MC
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