please provide the answers

Part 1:
Calculate the NPV for the following capital budgeting proposal: $100,000 initial cost for equipment, straight-line depreciation over 5 years to a zero book value, $5,000 pre-tax salvage value of equipment, 35
% tax rate, $45,000 additional annual revenues, $15,000 additional annual cash expenses, $8,000 initial investment in working capital to be recouped at project end, and a cost of capital of 11
%. Should the project be accepted or rejected? (Show your work computing the NPV.)
Part 2: Essay
Explain why bond prices fluctuate in response to changing interest rates. What adverse effect might occur if bond prices remain fixed prior to their maturity?
Part 3:
A stock offers an expected dividend of $3.50, has a required return of 14
%, and has historically exhibited a growth rate of 6
%. Its current price is $35.00 and shows no tendency to change. How can you explain this price based on the constant-growth dividend discount model?
Part 4:
Calculate the expected rate of return for the following portfolio, based on a Treasury bill yield of 4
% and an expected market return of 13
%: (Show your work)





Stock


Weight

Beta





A


20
%


1.6





B



25
%


1.2





C



10
%


1.0





D



30
%


0.9





E



15
%


0.8

Part 5: Essay
Discuss the capital asset pricing model in general, the CAPM method of determining expected returns, and how the SML can be used to help predict the movement of a stocks price.
Part 6: Essay
Contrast the Dow Jones Industrial Average and the Standard and Poors Composite Index.

Leave a Reply

Your email address will not be published. Required fields are marked *