You own a portfolio that has 2000 shares of stock A, which is priced at $13.27...

 

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You own a portfolio that has 2000 shares of stock A, which is priced at $13.27 per share and has an expected return of 16.16%, and 2000 shares of stock B, which is priced at $9.16 per share and has an expected return of 7.57%. The risk-free return is 4.27% and inflation is expected to be 3.27%. What is the risk premium for your portfolio? O 6.70% (plus or minus 0.02 percentage points) O 5.03% (plus or minus 0.02 percentage points) 8.38% (plus or minus 0.02 percentage points) 7.54% (plus or minus 0.02 percentage points) None of the above is within 0.02 percentage points of the answer ✓ Question Completion Status: XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $45,300.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the system would be sold for an after-tax cash flow of $14,800.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $76,200.00 in 1 year and $68,600.00 in 2 years. If the tax rate is 45.80% and the cost of capital is 8.20%, what is the net present value of the new interception system project? O $16324.18 (plus or minus $50) $13574.32 (plus or minus $50) $15531.91 (plus or minus $50) O $12249.18 (plus or minus $50) None of the above is within $50 of the correct answer 7 © N W 3 E 80 F3 69 4 R OOD DOO F4 do LO % 5 F5 T MacBook Pro ^ 6 F6 & Y 7 Ad F7 8 U گے ہے 9 02 Ohio Shoe Stores is planning to sell its Brunswick, Warren, and North Ridgeville stores. The firm expects to sell each of the three stores for the same, positive cash flow of $E. The firm expects to sell its Brunswick store in Z years, its Warren store in Z years, and its North Ridgeville store in X years. The cost of capital for the Brunswick and Warren stores is J percent and the cost of capital for the North Ridgeville store is M percent. We know that Z> X>0 and J> M > 0. The cash flows from the sales are the only cash flows associated with the various stores. Based on the information in the preceding paragraph, which one of the following assertions is true? O The Warren store is the most valuable of the 3 stores O Two of the three stores have equal value and those two stores are more valuable than the third store or all three stores have the same value O The Brunswick store is the most valuable of the 3 stores O The North Ridgeville store is the most valuable of the 3 stores O Cannot be determined based on the information given 2 7 788 4 9:5 20 000 000 % 5 F5 MacBook Pro < 6 F6 & 7 F7 ∞ F8 82 9 North Carolina Technology has a weighted-average cost of capital of 8.81 percent and is evaluating two projects: A and B. Project A involves an initial investment of $36,600.00 and an expected cash flow of $64,900.00 in 4 years. Project A is considered more risky than an average-risk project at North Carolina Technology, such that the appropriate discount rate for it is 5.03 percentage points different than the discount rate used for an average-risk project at North Carolina Technology. The internal rate of return for project A is 10.49 percent. Project B involves an initial investment of $71,500.00 and an expected cash flow of $118,700.00 in 5 years. Project B is considered less risky than an average-risk project at North Carolina Technology, such that the appropriate discount rate for it is 1.17 percentage points different than the discount rate used for an average-risk project at North Carolina Technology. The internal rate of return for project B is 9.56 percent. What is X if X equals the NPV of project A plus the NPV of project B? O $12687.71 (plus or minus $10) O $21619.10 (plus or minus $10) $16021.54 (plus or minus $10) $10641.74 (plus or minus $10) O None of the above is within $10 of the correct answer 1 2 1 C J #3 80 F3 $ 4 C DOO 000 F4 % 5 F5 T MacBook Pro < 6 F6 & Y 7 52 8 U DD - 9 C VE You own a portfolio that has 2000 shares of stock A, which is priced at $13.27 per share and has an expected return of 16.16%, and 2000 shares of stock B, which is priced at $9.16 per share and has an expected return of 7.57%. The risk-free return is 4.27% and inflation is expected to be 3.27%. What is the risk premium for your portfolio? O 6.70% (plus or minus 0.02 percentage points) O 5.03% (plus or minus 0.02 percentage points) 8.38% (plus or minus 0.02 percentage points) 7.54% (plus or minus 0.02 percentage points) None of the above is within 0.02 percentage points of the answer ✓ Question Completion Status: XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $45,300.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the system would be sold for an after-tax cash flow of $14,800.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $76,200.00 in 1 year and $68,600.00 in 2 years. If the tax rate is 45.80% and the cost of capital is 8.20%, what is the net present value of the new interception system project? O $16324.18 (plus or minus $50) $13574.32 (plus or minus $50) $15531.91 (plus or minus $50) O $12249.18 (plus or minus $50) None of the above is within $50 of the correct answer 7 © N W 3 E 80 F3 69 4 R OOD DOO F4 do LO % 5 F5 T MacBook Pro ^ 6 F6 & Y 7 Ad F7 8 U گے ہے 9 02 Ohio Shoe Stores is planning to sell its Brunswick, Warren, and North Ridgeville stores. The firm expects to sell each of the three stores for the same, positive cash flow of $E. The firm expects to sell its Brunswick store in Z years, its Warren store in Z years, and its North Ridgeville store in X years. The cost of capital for the Brunswick and Warren stores is J percent and the cost of capital for the North Ridgeville store is M percent. We know that Z> X>0 and J> M > 0. The cash flows from the sales are the only cash flows associated with the various stores. Based on the information in the preceding paragraph, which one of the following assertions is true? O The Warren store is the most valuable of the 3 stores O Two of the three stores have equal value and those two stores are more valuable than the third store or all three stores have the same value O The Brunswick store is the most valuable of the 3 stores O The North Ridgeville store is the most valuable of the 3 stores O Cannot be determined based on the information given 2 7 788 4 9:5 20 000 000 % 5 F5 MacBook Pro < 6 F6 & 7 F7 ∞ F8 82 9 North Carolina Technology has a weighted-average cost of capital of 8.81 percent and is evaluating two projects: A and B. Project A involves an initial investment of $36,600.00 and an expected cash flow of $64,900.00 in 4 years. Project A is considered more risky than an average-risk project at North Carolina Technology, such that the appropriate discount rate for it is 5.03 percentage points different than the discount rate used for an average-risk project at North Carolina Technology. The internal rate of return for project A is 10.49 percent. Project B involves an initial investment of $71,500.00 and an expected cash flow of $118,700.00 in 5 years. Project B is considered less risky than an average-risk project at North Carolina Technology, such that the appropriate discount rate for it is 1.17 percentage points different than the discount rate used for an average-risk project at North Carolina Technology. The internal rate of return for project B is 9.56 percent. What is X if X equals the NPV of project A plus the NPV of project B? O $12687.71 (plus or minus $10) O $21619.10 (plus or minus $10) $16021.54 (plus or minus $10) $10641.74 (plus or minus $10) O None of the above is within $10 of the correct answer 1 2 1 C J #3 80 F3 $ 4 C DOO 000 F4 % 5 F5 T MacBook Pro < 6 F6 & Y 7 52 8 U DD - 9 C VE

Answer rating: 100% (QA)

To calculate the risk premium for a portfolio we need to subtract the riskfree rate of return from t... View the full answer