Embry mbaa518 6.3 – Readings and Videos Quiz 6

*********

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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