You have discovered from looking at news announcements on the Wall Street Journal website that if you buy the stock of a firm on the day the firm announces that it has higher than expected earnings, you make money every time in the following week! This is clearly a violation of the _____ of market efficiency.

A project requires an initial investment of $9 million. The target D/E ratio is 0.60. Flotation costs for equity are 7% and flotation costs for debt are 3%. What is the true cost (in dollars) of the project when you consider flotation costs?

What is the market value of a bond that will pay a total of ten semi-annual coupon payments of $70 each over the remainder of its life? Assume the bond has a $1,000 face value and a 6% yield to maturity (APR).

What is the future value at the end of year 4 of the following set of cash flows? Assume an interest rate of 7%. Year                                 1                2                3                4          Cash Flow                    +$900         -$900         +$800           -800

According to the CAPM, what is the expected return on asset A if it has a beta of 1.2, the expected market risk premium is 15%, and the T-bill rate is 1%?

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%?

Suppose that your firm has a cost of equity of 12% and a cost of debt of 6%. If the target debt/equity ratio is 0.60, and the tax rate is 30%, what is the firm’s weighted average cost of capital (WACC)?

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.

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?