Josh has invested in a stock that has a 20% chance of producing a +12% return, a 15% chance of producing a +30% return, a 25% chance of producing a 22% return, and a 40% chance of producing a +10% return. Determine Joshs expected rate of return on this investment.

12.5%

16.4%

5.4%

9.00%

The expected rates of return and standard deviations, respectively for each of four stocks, are given below: ABC 7%, 3% CDE 8%, 5% FGH 9%, 7% IJK 13%, 9% If considered as a stand-alone investment, which stock is clearly least desirable?

CDE

IJK

FGH

ABC

True or False: "Founders' shares" are a type of classified stock where the shares are owned by the firm's founders and they generally have more votes per share than the other classes of common stock.

True

False

True or False: For capital budgeting and cost of capital purposes, the firm should assume that each dollar of capital is obtained in accordance with its target capital structure, which for many firms means partly as debt, partly as preferred stock, and partly common equity.

True

False

The Walt Disney Co. has been analyzing its WACC in order to find ways to make the company more competitive. Of the factors that can affect the WACC, Disney can directly control all of the following except which one?

its corporate tax rate

its criteria for choosing projects

its capital structure

its dividend payout ratio