According to the CAPM, what is the expected return on asset A if it has a beta of 2.5, the expected market return is 7%, and the T-bill rate is 1%?

A project requires an initial investment of $26 million. The target D/E ratio is 1.5. Flotation costs for equity are 10% and flotation costs for debt are 3%. What is the true cost (in dollars) of the project when you consider flotation costs?

A firm should try to be as liquid as possible.

Abaco Industries has bonds outstanding with a 6% coupon rate (APR) and a market price of $850. If the bonds mature in 5 years and interest is paid semi-annually, what is the YTM (as an APR) of those bonds?

A firm is expected to pay a dividend of $12 per share any day now. This dividend, along with the firm’s earnings, are expected to grow at a rate of 4% forever. If the current market price for a share is $67, what is the cost of equity?

You have discovered from looking at charts of past stock prices that if you sell just after a stock price has declined for two consecutive weeks, you make money every time in the following week! This is clearly a violation of the _____ of market efficiency.

Financial ratios that measure the firm’s ability to pay its bills over the short run without undue stress are known as:

You just won the lottery and want to put some money away for your child’s college education. College will cost $80,000 in 15 years. You can earn 4% compounded annually. How much do you need to invest today, assuming you make a one-time investment?

Calculate the NPV of the following project using a discount rate of 5%:       Yr 0 = –$800; Yr 1 = –$80; Yr 2 = +$200; Yr 3 = +$300; Yr 4 = +$500; Yr 5 = +$500

A firm’s _____ tax rate is defined as the tax amount divided by the taxable income.