The risks classes used to apply the risk adjusted discount rates Introduction: The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

An insurance company has liabilities of £7 million due in 10 years' time and £9 million due in 17 years' time. The assets of the company consist of two zero-coupon bonds, one paying £X million in 7 years' time and the other paying £Y million in 20 years' time. The current interest rate is 6% per annum effective. Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays in 7 year's time) such that the first two conditions for Redington's theory of immunisation are satisfied. Express your answer to THREE DECIMAL PLACES.

An individual is investing in a market where spot rates and forward rates apply. In this market, if at time t=0 he agrees to invest £5.3 for two years, he will receive £7.4 at time t=2 years. Alternatively, if at time t=0 he agrees to invest £5.3 at time t=1 for either one year or two years, he will receive £7.5 or £7.3 at times t=2 and t=3, respectively. Calculate the price per £5,000 nominal that the individual should pay for a fixed-interest bond bearing annual interest of 6.6% and is redeemable after 3 years at 110%. State your answer at 2 decimal places.

Answer 2

Question

Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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Answer 3

Question

Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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Answer 4

Question

Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Expert Solution & Answer

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Answer 5

Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Answer 6

Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Answer 7

Chapter 12.4, Problem 12.8RQ

Summary Introduction

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Answer 8

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Answer 11

Ch. 12.1 - Are most mutually exclusive capital budgeting...Ch. 12.2 - Prob. 1FOP Ch. 12.2 - Prob. 12.2RQ Ch. 12.2 - Describe how each of the following behavioral...Ch. 12.3 - Briefly explain how the following items affect the...Ch. 12.4 - Prob. 1FOE Ch. 12.4 - Prob. 2FOE Ch. 12.4 - Describe the basic procedures involved in using...Ch. 12.4 - Explain why a firm whose stock is actively traded...Ch. 12.4 - Prob. 12.8RQ

The risks classes used to apply the risk adjusted discount rates Introduction: The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Solution Summary: The author explains that the capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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Chapter 12 Solutions

The risks classes used to apply the risk adjusted discount rates Introduction: The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Solution Summary: The author explains that the capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

Concept explainers

Videos

To discuss: The risks classes used to apply the risk adjusted discount rates Introduction: The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.

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Chapter 12 Solutions

To discuss:

The risks classes used to apply the risk adjusted discount rates

Introduction:

The capital pricing model is used to evaluate appropriate required return rate of asset for making decisions about assets adding to the diversified portfolio.