The market has an expected rate of return of 6.50 percent. A long-term government bond is expected to yield 3.4 percent and a U.S. Treasury bill is expected to yield 2.25 percent. The inflation rate is 2.15 percent. What is the market risk premium?

Nguyen Corporation’s common stock has a beta of 1.38. The risk-free rate is 1.78 percent and the expected return on the market is 14.6 percent. What is the cost of equity?

Galindo Recovery is considering an expansion project with cash flows of −$287,500, $107,500, $196,100, $104,500, and −$92,700 for Years 0 through 4, respectively. Should the firm proceed with the expansion based on the discounting approach to the modified internal rate of return if the discount rate is 13.4 percent? Why or why not?

When evaluating two mutually exclusive projects, the final decision on which project to accept ultimately depends upon which one of the following?

Suppose you bought a $1,000 face value bond with a coupon rate of 5.6 percent one year ago. The purchase price was $987.50. You sold the bond today for $994.20. If the inflation rate last year was 2.6 percent, what was your exact real rate of return on this investment?

A stock has a beta of .85 and an expected return of 9.12 percent. If the stock’s reward-to-risk ratio is 6.05 percent, what is the risk-free rate?

Lopez Framing sells its inventory 43.2 days after acquiring it. By prior agreement, it pays its suppliers 48.5 days after taking possession of the inventory. It requires customers to pay by credit card; accordingly, it collects its receivables in 4.2 days. Given this information, what is the length of its operating cycle?

Which one of the following is the most likely reason why a stock price might not react at all on the day that new information related to the stock’s issuer is released? Assume the market is semistrong form efficient.

Alcid Manufacturing is analyzing a project with anticipated sales of 8,400 units, ±2 percent. The variable cost per unit is $72, ±2 percent, and the expected fixed costs are $243,000, ±1 percent. The sales price is estimated at $119 per unit, ±3 percent. The depreciation expense is $34,200 and the tax rate is 21 percent. What is the earnings before interest and taxes under the base-case scenario?

The primary purpose of Blume’s formula is to: