CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 11, Problem 6PROB
Summary Introduction
CAPM:
Calculate the cost of
Given risk free rate is 5%and expected market risk premium is 7% and beta is
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Explain.
The government finance which includes the principles and practices relating to the Procurement and management of funds for Central Government, and Local bodies is known as:
a.Public Finance
b.All of these
c.Private Finance
d.Business Finance
Explain.
The decisions relating to the use of profits or income of an entity or organization are known
a.Any of these
b.Dividend decisions
c.Finance decisions
d.Investment Decision
The degree correlation between risk and return over a longer period of time is generally …?
a.Highly negative
b.Non correlation
c.Negative
d.Highly positive
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- The relationship of required rate of return and risk shows the linearity in the: a.None of these b.Capital market line c.Security market line d.Asset market linearrow_forwardPurchasing power of risk hit the investor when there are chances that the: a.None of these b.Real return on a security is equal to the nominal return c.Real return on a security is less than the nominal return d.Real return on a security is more than the nominal returnarrow_forwardneed help by real expert and true answer...arrow_forward
- What is the full form of "YTD"? a.Yield of Divergence b.Year to Delivery c.Year-to-date d.Yield to Debitarrow_forwardQuestion Three A company needs $10,000 in 5 years to replace a piece of equipment. How much must be invested now at an interest rate of 8% p.a. compounded daily in order to provide for this replacement?arrow_forwardYear Free Cash Flow (FCF) 0 -$17,000,000 1 $4,980,000 2 $4,980,000 3 $4,980,000 4 $4,980,000 5 $6,980,000 The Net Present Value at a discount rate of 15%: Present Value (PV) for each year: PV(Year 1) = $4,980,000 ÷ (1 + 0.15)^1 = $4,330,435. PV(Year 2) = $4,980,000 ÷ (1 + 0.15)^2 = $3,765,590. PV(Year 3) = $4,980,000 ÷ (1 + 0.15)^3 = $3,274,426. PV(Year 4) = $4,980,000 ÷ (1 + 0.15)^4 = $2,847,328. PV(Year 5) = $6,980,000 ÷ (1 + 0.15)^5 = $3,477,617. Sum of PVs = $4,330,435 + $3,765,590 + $3,274,426 + $2,847,328 + $3,477,617 = $17,695,396. Initial Investment = $17,000,000. NPV = Total PV - Initial Investment = $17,695,396 - $17,000,000 = $695,396. Calculate The Internal Rate of Returnarrow_forward
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