b-3. Find the corresponding predicted return of a firm that is not high-tech. (Round coefficient estimates to at least 4 decimal places and final answer to 2 decimal places.) Predicted initial return of a non high-tech firm
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- Which of the following statements is most correct? (Hint: Work Problem 4-16 before answering 4-17, and consider the solution setup for 4-16, as you think about 4-17.) a. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will raise the firm' expected return on common equity (ROE). b. The higher its tax rate, the lower a firm's BEP ratio will be, other things held constant. c. The higher the interest rate on its debt, the lower a firm's BEP ratio will be, other things held constant. d. The higher its debt ratio, the lower a firm's BEP ratio will be, other things held constant. e. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will decrease the firm's expected return on common equity (ROE).What is WACC (select all that are true)? Group of answer choices Rd (1-Tc) * D/V + Re * E/V Weighted Average Cost of Capital For a firm overall, it is based on the riskiness of the firm's assets While it is generally estimated by looking at the right-hand-side of the balance sheet, it is largely driven by the left-hand-side (i.e., assets) It is the amount that equity holders demand for an investment in a firm It is the amount that debt holders demand for a loan made to the firm6. Use Excel, Calculator, and Formula. Show your work. Based on the data below, estimate the following: E(r) = [Probability of Economic State x Return in Economic State 0² (r) = [[Return in State; - E(r)]³ x Probability of State; a. Estimate the expected return and risk of Asset A (TESLA) b. Estimate the Expected Return and risk of Asset B (APPLE) c. Estimate the Expected return and risk of a 60A and 40B portfolio d. Summarize your results and determine whether the Portfolio Diversification helped decrease the investment risk. Explain your answer. State of the Economy Probability of Economic State S Pr 1 N 0.6 Return In Economic State TESLA APPLE R R 0.27 -0.10 -0.15 0.35
- The.. value.. of.. an.. ordinary.. share..Select one or more:a. Will fall if future profit forecasts are higher than expectedb. Is always at its fundamental valuec. Can rise and fall along with market sentimentd. Will rise if a firm introduces some cost saving innovationAnalyst forecasts which focus on a top-down approach to forecasting future performance are most likely paying attention to: A. Macroeconomic factors such as gross domestic product (GDP) B. Signals from individual companies within an industry first OC. Microeconomic factors such as dividend yields on bio-technology stocks (shares)Management has constructed the below table of estimates reflecting the possible returns and probabilities for pessimistic, most likely and optimistic results. Possible outcomes probability return(n$) Pessimistic 0.4 14.00 Most likely 0.2 34.00 Optimistic 0.4 6.00 a) Determine the expected value of return for the above company b) What is the risk involved if the company chooses to invest in the above opportunity?
- A trend analysis indicates a firm's performance ____. a.over time b.more accurately than any other type of analysis c.at one given point in time d.without relying on financial ratiosContinuing with Beta (B) talk. What is TRUE? When Beta of a firm increases, its cost of capital may increase When the risk of a company increases, its beta may decrease O Beta of a firm stays the same over the life of the firm Firms in the high growth areas (e.g., technology) have lower betasUsing the data in the following table for a number of firms in the same industry, dothe following:•a. Compute the total asset turnover, the net profit margin, the equity multiplier, andthe return on equity for each firm.b. Evaluate each firm’s performance by comparing the firms with one another.Which firm or firms appear to be having problems? What corrective actionwould you suggest the poorer performing firms take? Finally, what additional data would you want to have on hand when conducting youranalyses?Firm (in million Dollars A B C D Sales $20 $10 $15 $25 Net Income after sales 3 0.5 2.25 3 Total Assets 15 7.5 15 24 Stockholders’ Equity 10 5 14 10
- An increase in a firm's expected growth rate would cause its required rate of return to O a. fluctuate less than before. O b. increase. c. decrease. d. possibly increase, possibly decrease, or possibly remain constant. O e. fluctuate more than before.Check all the factors that would be associated with an increase in a firm's price-to-earnings ratio. All the correct factors must be checked to receive credit for getting this question correct . a Increase in the beta of a firm's stock b Decrease in the beta of a firm's stock c Increase in the risk-free rate d Decrease in the risk-free rate e Increase in a firm's growth rate of cash flow f Decrease in a firm's growth rate of cash flow g Increase in the market risk premium h Decrease in the market risk premiumWhich of the following is needed to calculate a firm’s WACC? A. the cost of carrying inventory B. the amount of capital necessary to make the investment C. the cost of preferred stock D. the probability distribution of expected returns E. both b and c