What is the net present value of the project? Should the firm buy and install the...

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What is the net present value of the project? Should the firm buy and install the machine press? (15 marks) MACRS Table-5 years Year 1 2 3 4 5 6 Recession Normal Boom MACRS Percentage Glow Corporation issued a 11-year bond a year ago at a coupon rate of 6.5 percent. The bond has a face value of $1,000 and makes semiannual payments. If the yield to maturity on the bond is 7.4 percent, what is the current bond price? (5 marks) 20.00% 32.00 19.20 11.52 11.52 5.76 Chartreuse County Choppers Inc. is experiencing rapid growth. The company expects dividends to grow at 25 percent per year for the next 11 years and then level off to a 6 percent growth rate indefinitely. The required return on the company's stock is 12 percent. If the dividend per share just paid was $1.74, what is the stock price? (10 marks) Based on the following information, calculate the expected return and standard deviation for the two equities. (10 marks) State of Economy Probability of State of Economy 0.25 0.55 0.20 Rate of Return if State Occurs Equity B -0.17 0.12 0.29 Equity A 0.05 0.08 0.13 An equity has a beta of 1.35 and an expected return of 16 percent. A risk-free asset currently earns 4.8 percent. You form a portfolio based on these two assets. a. If a portfolio of the two assets has a beta of 0.95, what are the portfolio weights? (5 marks) b. If a portfolio of the two assets has an expected return of 8 percent, what is its beta? (5 marks) What is the net present value of the project? Should the firm buy and install the machine press? (15 marks) MACRS Table-5 years Year 1 2 3 4 5 6 Recession Normal Boom MACRS Percentage Glow Corporation issued a 11-year bond a year ago at a coupon rate of 6.5 percent. The bond has a face value of $1,000 and makes semiannual payments. If the yield to maturity on the bond is 7.4 percent, what is the current bond price? (5 marks) 20.00% 32.00 19.20 11.52 11.52 5.76 Chartreuse County Choppers Inc. is experiencing rapid growth. The company expects dividends to grow at 25 percent per year for the next 11 years and then level off to a 6 percent growth rate indefinitely. The required return on the company's stock is 12 percent. If the dividend per share just paid was $1.74, what is the stock price? (10 marks) Based on the following information, calculate the expected return and standard deviation for the two equities. (10 marks) State of Economy Probability of State of Economy 0.25 0.55 0.20 Rate of Return if State Occurs Equity B -0.17 0.12 0.29 Equity A 0.05 0.08 0.13 An equity has a beta of 1.35 and an expected return of 16 percent. A risk-free asset currently earns 4.8 percent. You form a portfolio based on these two assets. a. If a portfolio of the two assets has a beta of 0.95, what are the portfolio weights? (5 marks) b. If a portfolio of the two assets has an expected return of 8 percent, what is its beta? (5 marks)

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