The manager is debating how to raise $12M to finance the investment. The annual interest rate on a risk-free bond is 4 percent per year. Given the interest rate, how much would the firm have to pay back in six years?

Suppose that in order to raise $12M in debt, the market requires a risk premium of 7 percent on the firm’s bond. Given the risk-free rate of 4 percent, how much would the firm pay back in six years?

 Suppose several news articles come out explaining that the firm has a positive NPV project. According to the efficient market hypothesis, would we expect the stock price to go up or go down after the release of the first article?

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Lets address each part of the question 1 RiskFree Bond Interest Rate The manager is considering rais... View the full answer