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the stock? (LO3) 14. You are trying to decide whether to buy stock in Company X or Company Y Both companies need $1,000 capital investment
the stock? (LO3) 14. You are trying to decide whether to buy stock in Company X or Company Y Both companies need $1,000 capital investment and will earn $200 in good years only difference between the (with probability 0.5) and $60 in bad years. The companies is that Company X is planning to raise all of the $1,000 needed by issuing equity, while Company Y plans to finance $500 through equity and $500 through bonds on which 10 percent interest must be paid. Construct a table showing the expected value and standard deviation of the equity return for each of the companies. (You could use Table 8.3 as a guide.) Based on this table, in which company would you buy stock? Explain your choice. (LO3) the stock? (LO3) 14. You are trying to decide whether to buy stock in Company X or Company Y Both companies need $1,000 capital investment and will earn $200 in good years only difference between the (with probability 0.5) and $60 in bad years. The companies is that Company X is planning to raise all of the $1,000 needed by issuing equity, while Company Y plans to finance $500 through equity and $500 through bonds on which 10 percent interest must be paid. Construct a table showing the expected value and standard deviation of the equity return for each of the companies. (You could use Table 8.3 as a guide.) Based on this table, in which company would you buy stock? Explain your choice. (LO3)
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