Financial Management I_FIN-2AB_20242
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A project has the following estimated data: price = $79 per unit; variable costs = $29.23 per unit; fixed costs = $7,800; required return = 16 percent; initial investment = $9,000; life = six years. Ignore the effect of taxes. The financial break-even quantity is:
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You have a portfolio that is invested 23 percent in Stock A, 40 percent in Stock B, and 37 percent in Stock C. The betas of the stocks are .72, 1.27, and 1.56, respectively. The beta of the portfolio is:
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A project that achieves cash break-even point means that:
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There is 14 percent probability of recession, 11 percent probability of a poor economy, 47 percent probability of a normal economy, and 28 percent probability of a boom. A stock has returns of −19.6 percent, 3.2 percent, 11 percent, and 26.7 percent in these states of the economy, respectively. The stock's expected return is:
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A stock will have a loss of 11.1 percent in a bad economy, a return of 10.9 percent in a normal economy, and a return of 24.8 percent in a hot economy. There is 33 percent probability of a bad economy, 36 percent probability of a normal economy, and 31 percent probability of a hot economy. The variance of the stock's returns is:
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You have a portfolio that is 32 percent invested in Stock R, 14 percent invested in Stock S, with the remainder in Stock T. The expected return on these stocks is 8.3 percent, 9.7 percent, and 12.0 percent, respectively. The expected return on the portfolio is:
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A project has the following estimated data: price = $85 per unit; variable costs = $41.65 per unit; fixed costs = $7,800; required return = 16 percent; initial investment = $10,000; life = six years. Ignore the effect of taxes. The degree of operating leverage at the financial break-even level of output is:
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A company has a cost of equity of 10.93 percent, a pretax cost of debt of 5.48 percent, and a tax rate of 21 percent. The company's capital structure consists of 73 percent debt on a book value basis, but debt is 39 percent of the company's value on a market value basis. The company's WACC is:
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Which of the following statements regarding the weighted average cost of capital is correct?
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The stock in a company has a beta of 1.24. The expected return on the market is 11.20 percent and the risk-free rate is 2.82 percent. The required return on the company's stock is:
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