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different stocks True/False . Stock A’s beta is 1.5 and Stock B’s beta is 0.5. Which of the following statements must be true about these securities? (Assume market equilibrium.) e. When held in isolation, Stock A has greater risk than Stock B. a. Stock B must be a more desirable addition to a portfolio than Stock A. b. Stock A must be a more desirable addition to a portfolio than Stock B. c. The expected ...

Other / Other 19 Mar 2016

Selleck & Company . The slope of the SML is determined by the value of beta. a. True b. False . If you plotted the returns of Selleck & Company against those of the market and found that the slope of your line was negative, the CAPM would indicate that the required rate of return on Selleck’s stock should be less than the risk-free rate for a well-diversified investor, assuming that the observed relationship is expected ...

Other / Other 19 Mar 2016

managerial actions True/False . In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are interested in ex ante (future) data. a. True b. False Medium: . If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose ...

Other / Other 19 Mar 2016

slope and intercept True/False Easy: . In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are interested in ex ante (future) data. a. True b. False Medium: . If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock ...

Other / Other 19 Mar 2016

Common Stock and Retained Earnings (4 points) A firm has the following book-value balance sheet; Debt =$20,000, Common Stock ($1 par)= 15 and Retained Earnings = $36,000. The book value of assets is the total of Debt, Common Stock and Retained Earnings. The firm's bonds are currently selling at par and the firm's stock is currently selling for $15. The firm's tax rate is 40%. What is the value of the firm's tax shield (i.e. the chang ...

Other / Other 19 Mar 2016

perfect capital markets 1. Now consider a DIFFERENT COMPANY in a world that of perfect capital markets, with one change, CORPORATE TAXES DO EXIST. This world has no personal taxes, all investors have homogeneous expectations, no bankruptcy costs, and M&M’s with corporate taxes theory of capital structure is true. Company Y is financed has the following market value balance sheet: Assets = $ 110 Liabilities = $0 Equity = $110 ...

Other / Other 19 Mar 2016

perfect capital markets 1. (Point values are as listed) Use the following information for the next several questions. Consider a world of perfect capital markets. This world has no corporate or personal taxes, all investors have homogeneous expectations, no bankruptcy costs, and M&M’s no-tax theory of capital structure is true. Company Y is financed has the following market value balance sheet: Assets = $355 Liabilities = $ ...

Other / Other 19 Mar 2016

a low growth firm 1. (8 points) In 2004, the Lissa Company, a low growth firm, paid dividends of $5,000,000 on after-tax income (cash flow) of $25,000,000. Capital budget projects totaled $4,000,000 in 2004. 2004 was a normal year for earnings, dividends, and capital budgets. For the past 12 years, earning have grown at a constant rate of 4%. However, in 2005, earnings are expected to fall to $20,000,000 and the firm expects to have ...

Other / Other 19 Mar 2016

cost of capital 1. (Point values are as listed) Use the following information for the next several questions. Consider a world of perfect capital markets. This world has no corporate or personal taxes, all investors have homogeneous expectations, no bankruptcy costs, and M&M’s no-tax theory of capital structure is true. Company Y is financed has the following market value balance sheet: Assets = $355 Liabilities = $81 Equity ...

Other / Other 19 Mar 2016

tradeoff theory Briefly list the major conclusions of the tradeoff theory of capital structure? Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help ...

Other / Other 19 Mar 2016