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Missouri Southern State University ECON 350 Financial Management Exam Chapter 8 SHORT QUESTIONS 1)Asset A was purchased six months ago for $25,000 and has generated $1,500 cash flow during that period
Missouri Southern State University
ECON 350
Financial Management Exam Chapter 8
SHORT QUESTIONS
1)Asset A was purchased six months ago for $25,000 and has generated $1,500 cash flow during that period. What is the asset's rate of return if it can be sold for $26,750 today?
- The following historical returns have been reported for Best Buy:
|
2002 |
9% |
|
2003 |
11.5% |
|
2004 |
3% |
|
2005 |
7.0% |
|
2006 |
10.0% |
- What was the average return for Best Buy during this five year period?
- What is the standard deviation of Best Buy’s returns for this period?
- What is the coefficient of variation of Best Buy?
- capital project has an initial investment of $100,000 and cash flows in years 1-6 of $25,000,
$10,000, $50,000, $10,000, $10,000, and $60,000, respectively. Given a 15 percent cost of capital,
- compute the net present value.
- compute the internal rate of return
- should the project be accepted? Why or why not?
- Promo Pak has compiled the following financial data: Source of Capital Book Value Market Value Cost
|
Long-term debt |
$10,000,000 |
$ 8,500,000 |
5.0% |
|
Preferred stock |
1,000,000 |
1,500,000 |
14.0 |
|
Common stock equity |
9,000,000 |
15,000,000 |
20.0 |
|
|
$20,000,000 |
$25,000,000 |
|
-
- Calculate the weighted average cost of capital using book value weights.
- Calculate the weighted average cost of capital using market value weights.
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