Problem 11.14 – Cash Flow and Leverage
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
Find the fixed costs and the operating cash flow. (May ask for DOL)
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Find the fixed costs and the operating cash flow. (May ask for DOL)
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Calculate the beta of a stock given its expected return, the risk-free rate, and the market risk premium.
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Calculate the expected return on the market given a stock’s expected return, beta, and risk-free rate.
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Calculate the risk-free rate given a stock’s expected return, beta, and expected return on the market. What must the risk-free rate be?
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Find the sensitivity of the operating cash flow based on changes in quantity.
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Calculate the reward-to-risk ratios for stocks given their betas, expected returns, risk-free rate, and market risk premium. Classify the stocks based on their reward-to-risk ratio in comparison to the SML reward-to-risk ratio.
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Determine the risk-free rate required for two stocks to be correctly priced, given their betas and expected returns.
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Calculate the return on a portfolio that is equally invested in two different asset classes. Specifically, determine the return on a portfolio that is equally invested in large-company stocks and long-term corporate bonds, as well as the return on a portfolio that is equally invested in small stocks and Treasury bills.
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Given the large-company stock, long-term corporate bonds, small company stock, and treasury bills… find the return on the portfolio for the large and the small company.
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Given two stocks with different betas and expected returns, calculate the portfolio weight of each stock that will result in the same risk as the market. Then, determine the expected return of the resulting portfolio.
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