Exam III Review II Questions

Exam III Review II Questions in $6 Only (Instant Download)Exam III Review II Questions

Use the following information for Questions 1 and 2:

A stock has a required return on 11 percent.  The risk-free is 7 percent, and the market risk premium is 4 percent.

  1. What is the stock’s beta?
  • 1.2
  • 1.1
  • 1.0
  • 0.9

2. If the market risk premium increases to 6 percent, what will happen to the stock’s required rate of return?

  • 6.00%
  • 7.00%
  • 11.00%
  • 13.00%

Finance Question: NPV and CAPM Related

Finance Question: NPV and CAPM Related

Finance Question: NPV and CAPM Related

Suppose that a project is to last 10 years, has an initial investment of $20,000, and cash flows of $2,000 per year and a terminal cash flow of $9,000.

Further, suppose that the project has a beta of 1.2, the risk free rate is 5.5%, and the market premium is 7.0%.  Calculate the NPV of this project and identify the decisions rule.

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