Question
Q1. Bing Services is now in the final year of a project.The equipment originally cost $20,000, of which 88% has been depreciated.Bing can sell the
Q1. Bing Services is now in the final year of a project.The equipment originally cost $20,000, of which 88% has been depreciated.Bing can sell the used equipment today for $7,500, and its tax rate is 25%.What is the equipment's net after-tax salvage value for use in a capital budgeting analysis?
Q2. A project's base case or most likely NPV is $44,000, and assume its probability of occurrence is 50%. Assume the best case scenario NPV is 85% higher than the base case and assume the worst scenario NPV is 35% lower than the base case.Both the best case scenario and the worst case scenario have a 25% probability of occurrence.Find the project's coefficient of variation.
Q3.Rick Kish has a $140,000 stock portfolio.$50,000 is invested in a stock with a beta of 1.25 and the remainder is invested in a stock with a beta of 2.45.These are the only two investments in his portfolio.What is his portfolio's beta?
Q4.ABC Company's stock has a beta of 1.95, the risk-free rate is 2.25%, and the market risk premium is 7.75%.What is ABC's required rate of return using CAPM?
Q5.Hazel Morrison, a mutual fund manager, has a $60 million portfolio with a beta of 1.00. The risk-free rate is 3.25%, and the market risk premium is 6.00%. Hazel expects to receive an additional $40 million, which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 15%. What must the average beta of the new stocks be to achieve the target required rate of return?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started