Rate of return for a stock using the capital asset pricing model.

Calculating Beta using Linear Equation.

Capital Budgeting: calculate the internal rate of return

For each of the projects shown in the following table, calculate the internal rate of return (IRR). Intial Cash Outflow Prjct A Prjct B Prjct C Prjct D $72,000 440,000 18,000 215,00 Inflows in year 1 16,000 135,000 7,000 108,00 ...continues

Retirement planning: How much do you have to put into your account at the end of each year to reach your retirement goal?

You are planning your retirement and you come to the conclusion that you need to have saved $1,250,000 in 30 years. You can invest into an retirement account that guarantees you a 5% annual return. How much do you have to put into your account at the end of each year to reach your retirement goal?

Major functions of derivative markets: options, contracts, bid-ask spread, in the money

1. What are the major functions of derivative markets in the economy? What are some ways in which derivatives can be misused? 2. Explain the difference between an American option and a European option. What do they have in common? Questions 3-5 use the information found in the following table from the CBOE for optio ...continues

Recapitalization plan for All-Star Production Corporation: shares, EPS, EBIT

The All-Star Production Corporation (APC) is considering recapitalization plan that would convert APC from its current all-equity capital structure to one including some financial leverage. APC now has 10,000,000 shares of common stock outstanding, which are selling for $40.00 each and you expect the firms EBIT to be $50,000,000 ...continues

Rates of return; probability return; expected rates; standard deviation;CAPM

See the attached problem. 1. I am considering a security with the following possible rates of return: Probability Return (%) 0.30 9.5 0.15 12.0 0.25 15.0 0.30 16.0 Please calculate the expected rate of return and the standard deviation of the returns (round to the nearest dollar). 2. Probability Return ...continues

Interest rate parity and Purchasing power parity: forward contract amount

1. Implication of IRP. Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the U.S. is 7%, while the one-year nominal interest rate in Australia is 11%. The spot rate of the Australian dollar is $.60. You will need 10 million Australian dollars in one year. Today, you purchase a one-yea ...continues

Bond calculations: discount, premium, amortization, after-tax cash flow

The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent tax bracket, and the bond has a $1,000 par value. Bond Proceeds per bond Size of issue Ini ...continues

Finance: Beta Corporation payment of cash dividends with legal capital limitations

Beta Corporation has the following shareholders' equity accounts Common stock at par $ 5,000,000 Paid-in capital in excess of par 2,000,000 Retained earnings 25,000,000 Total stockholders' equity $32,000,000 a. What is the maximum amount that Beta Corporation can pay in cash dividends without impairing its ...continues

Delta Corp: dividend payout ratio, constant nominal policy, partial-adjustment strategy

Delta Corporation earned $2.50 per share during fiscal year 2008 and paid cash dividends of $1.00 per share. During the fiscal year that just ended on December 31, 2009, Delta earned $3.00 per share, and the firm’s managers expect to earn this amount per share during fiscal years 2010 and 2011, as well. a. What is Delta’s pa ...continues