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*********
Question
1
2
*
* **** The use
**
**** ** ****** investments is ********** **** ***** *** ** ********
****
discounted ** *** ***** ************ ** *** new
********
*** equal
***** ** *** ******** ***
*****
to the risk ** *** firm
firm ** **** diversified and ***
************
**** is negligible
**** ** ****** ******** 2
* *
2
**** *** ****
**
a ********
provides
an:
estimate ** the
*****
** *** Capital ****** ***** estimate **
***
***** ** *** Security Market ***** **** of ******
********
** the ****** risk ******** estimate of the systematic
****
** the security
Question
** * * * **** ***
*********
*** ******* ** ******** *** market **** *********
***
the bond
*********
***** to estimate ******
**
**** prices with ********* ***** ** ******** use ********** ****
**
******** future **** ******* *** *** *** ******** ******** ***** ** estimate **** ******** *** the
********
******** ***** ** estimate **** ******** *** ********** **** ** ******** ****** **** ******** *** historical **** **
********
****** **** premium *** use *** **** ********* *****
to
******** ****** ** bond prices **** ********* *****
**
capital
******** ** * * * **** ** a **** *** low ***** costs relative ** *** ***** ***** ** *** same ******** * *****
******
** sales
volume
(either ** ** *****
*****
****** * smaller ****** ** **** for *** **** ****** *** ***** firms
** ****** ** any way ** *** firms ** ****** **** *** affect ***** ******
None
** ****** * decreasing ****** ** *** ******** ****** ** *** business
*
****** ****** ** **** *** *** firm versus the ***** ****** ******** ** 2 *
2
pts
For *
multi-product
**** ** * project’s beta is ********* **** that **
***
overall **** **** the:
CAPM *** ** ****** ** ***** ******* ******
**
********** using
***
******* firm’s ***** *******
******
** ********** ** *** market ***** ******* should be discounted at *** ****** rate
******* ****** ** **********
**
a **** ************ **** its ***
*****
******** ** 2 / 2 **** ***** ***** revenues
are
strongly ******** *** ***** ********* ******** ** ****
***
****** ** ****** **** ****** ******** ****** ****
******
**** ** ****** *** betas
Question 7
* * * **** ***
*******
***** **
cash
flows is important ***
****
** these
multiples ********* **** ****** ********* growth projections
discounted **** **** analysis
Question 8
*
*
* ****
****
***** the
****
** ****
the
******** ****** **
*****
******** cost
**
debt since
dividends
*** *** deductible
****
**
****** ******* **** ** **** ***** ** ** ***
******
**** *** ****
**
****** ************
*******
**** ** ****
*****
**** corporations
***
***** at the same
***
***** ********
****
** **** ***** ********
**
*** *********** ******** ** 2 / * **** The **** of
*
**** ** more ****** to ** high under ****
***
************ Low ********
business
******** *** low ********* leverage
High ******** business ******** *** *** operating ********* **** ********
********
******** and **** ********* ********* *** ******** ******** ******** *** *** ********* leverage
****
**
****** ******** *** * / 2 pts
* firm
with
******** ********
**
************* by:
revenue ********
****
**** **** *** ******** ****** high ***** ****** **** ***** *** ***** low contribution ********
****
****** of **** in its ******* structure
Question
11
2 * * pts
If *** ******* ****
***
*** *********** plot ***** *** *** *** *******
******
**** rejected
** ** ********** ** tell
****
**
****** accepted
**
****
depend on
***
**** ******** *** *
*
* **** *** **** ** **** ** *******
***
expected **** ***** **** *** **** has _______
discount;
***** **** *********
**
*** ******* sheet
discount;
****
*** ****** **
***
******* ********** increase; debt and equity ** ***
*******
********** ****
**
****** ********* ***** ****
*********
** the balance sheet
******** *** 2 * 2 **** If *** **** ** ****
to
estimate
the
**** ** ****** capital ***
expected
****** market ******
**
*****
**
***** ****** ** the stock *****
***
********* *****
******
**** ** ******* ****
*****
*** risk-free rate
********** ******* the ****** on *** ****** and *** ********* rate
****
*****
*** market risk ******** ******** *** * *
2
**** *** weighted ******* **** of ******* for
a
**** ** ***** maximum rate which *** ****
should
******* ** ***
********
** *********** **** of ****** that the firm’s
*********
stockholders should
expect
to **** **** ***
****
***** ******* **** which the firm **** earn on its ******** ****** ** maintain *** ***** ** its stock
******** ****
which
the **** ****** ***** ** *** ** ***
********
it *********** **** ***
****
****** expect ** *** on
***
next bond ****** Question 15
2 * 2 **** *** beta
of
a firm is ********** ** *****
**
the following
firm
***************** ********* ********* *********
*********
****** in ********* *** ** these
**** of *****
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embry mbaa518 6.3 – Readings and Videos Quiz 6.docx
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