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can you solve those problems please a) Astra Ltd has 30% debt and 70% equity. Cost of debt is 12% and the T-bill return is
can you solve those problems please
a) Astra Ltd has 30% debt and 70% equity. Cost of
debt is 12% and the T-bill return is 6%. Market returns
is 13% and beta of Astra Ltd. is 1.3. Tax rate is 30%.
The firm is evaluating a new project that has the same
risk as the overall firm. The cost is estimated at
$68,000 and the expected cash flows from the project
are:
Year
1
2
3
4
Cash Flow
18,000
25,000
35,000
17,000
Should the project be accepted or rejected? Briefly
explain why. (7 marks)
b) The money of shareholders, the principals, is used
by managers, the agents, who promise that the firm will
maximise shareholder wealth. What are the potential
problems with these relationships? (5 marks)
c) What is an efficient market? (1 mark)
Name and describe the three forms of market
efficiency. (3 marks)
d) What are the lessons learned from capital market
history? (1 mark)
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