You have been offered an opportunity to purchase a growing p…
You have been offered an opportunity to purchase a growing perpetuity. The first payment of $[CF] will occur two years from now, and the payments will start growing at a rate of [g]% per year indefinitely starting in year 2. If the discount rate is [IY]%, what is the present value of this perpetuity?
Read DetailsConsider the following two stocks: Stock A (%) Stock…
Consider the following two stocks: Stock A (%) Stock B (%) Risk-free Rate (%) Expected Return [ERA] [ERB] [RF] Standard Deviation [sA] [sB] 0.0 What is the Sharpe ratio of a portfolio that invests [wA] in stock A and (1 – [wA]) in stock B is the correlation between them is [correlation]?
Read DetailsBased on historical data, Target has a [rt]% expected annual…
Based on historical data, Target has a [rt]% expected annual return and [sdt]% standard deviation while Berkshire Hathaway has a [rb]% expected return and a [sdb]% standard deviation. Assume the correlation between the returns of these companies is [corr]%. What is the expected return of your portfolio if you split your money evenly between Target and Berkshire?
Read DetailsYou are evaluating a project that will cost $500,000, but is…
You are evaluating a project that will cost $500,000, but is expected to produce cash flows of $125,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11% and your company’s preferred payback period is three years or less. What is the payback period of this project?
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