Essentials Of Investments
11th Edition
ISBN: 9781260316193
Author: Bodie
Publisher: MCG
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Chapter 7, Problem 11PS
You arc a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars:
Years from Now
After-Tax CF
0 -20
-1-9 10
10 20
The project’s beta 1.7. Assuming rf9% and E(rm) = 19%, what is the
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You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in
millions of dollars):
Years from Now
0
1-10
After-Tax Cash Flow
-30
14
The project's beta is 1.6.
a. Assuming that r = 48 and E(M)= 18%, what is the net present value of the project? (Do not round intermediate calculations.
Enter your answer in millions rounded to 2 decimal places.)
Net present value
b. What is the highest possible beta estimate for the project before its NPV becomes negative? (Round your answer to 2 decimal
places.)
Highest beta
You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in
millions of dollars):
Years from
Now
0
1-10
After-Tax
Cash Flow
-45
12
The project's beta is 1.4.
Required:
a. Assuming that ry=6% and E(M) = 14%, what is the net present value of the project?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
b. What is the highest possible beta estimate for the project before its NPV becomes negative?
Note: Round your answer to 2 decimal places.
a. Net present value
b. Highest beta
You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in
millions of dollars):
Years from
Now
0
1-10
After-Tax
Cash Flow
-50
16
The project's beta is 1.1.
Required:
a. Assuming that rf= 7% and E(M) = 15%, what is the net present value of the project?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
b. What is the highest possible beta estimate for the project before its NPV becomes negative?
Note: Round your answer to 2 decimal places.
Chapter 7 Solutions
Essentials Of Investments
Ch. 7 - Prob. 1PSCh. 7 - Consider the statement: “If we can identify a...Ch. 7 - Are the following true or false? Explain. (LO 7-5)...Ch. 7 - Here are data on two companies. The T-bill rate is...Ch. 7 - Characterize each company in the previous problem...Ch. 7 - What is the expected rate of return for a stock...Ch. 7 - Kaskin, Inc., stock has a beta of 1.2 and Quinn,...Ch. 7 - What must be the beta of a portfolio with E(rf)) =...Ch. 7 - The market price of a security is $40. Its...Ch. 7 - You arc a consultant to a large manufacturing...
Ch. 7 - Consider the following table, which gives a...Ch. 7 - Prob. 13PSCh. 7 - Prob. 14PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 16PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 18PSCh. 7 - Prob. 19PSCh. 7 - Prob. 20PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Prob. 22PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Two investment advisers are comparing performance....Ch. 7 - Suppose the yield on short-term government...Ch. 7 - Based on current dividend yields and expected...Ch. 7 - Consider the following data for a single index...Ch. 7 - Assume both portfolios A and B are well...Ch. 7 - Prob. 29PSCh. 7 - Prob. 30PSCh. 7 - Et
Ch. 7 - Suppose two factors are identified for the U.S....Ch. 7 - Suppose there are two independent economic...Ch. 7 - As a finance intern at Pork Products, Jennifer...Ch. 7 - Suppose the market can be described by the...Ch. 7 - Which of the following statements about the...Ch. 7 - Kay, a portfolio n1anacr at Collins Asset...Ch. 7 - Prob. 3CPCh. 7 - Jeffrey Bruner, CFA, uses the capital asset...Ch. 7 - Prob. 5CPCh. 7 - According to CAPM, the expected rate of a return...Ch. 7 - Prob. 7CPCh. 7 - Prob. 8CPCh. 7 - 9. Briefly explain whether investors should expect...Ch. 7 - Assume that both X and Y are well-diversified port...Ch. 7 - Prob. 11CPCh. 7 - 12. A zero-investment, well-diversified portfolio...Ch. 7 - 13. An investor takes as large a position as...Ch. 7 - In contrast to the capital asset pricing model,...Ch. 7 - Prob. 1WMCh. 7 - Prob. 2WMCh. 7 - Prob. 3WMCh. 7 - a. Which of the stocks would you classify as...
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