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What effect does the recording of an expense have on the accounting equation?

What is media literacy? [1 sentence]

Give a hypothetical example of idiosyncratic risk and explain why this risk is idiosyncratic.

Let’s revisit the expansion project of In-N-Out Burger.  As you may remember In-N-Out was considering expanding beyond its Southern California roots to the south and southeast U.S.   You prepared the forecast below for the estimated free cash flows.   At this point you would like to evaluate the NPV of this project by the firm’s weighted average cost of capital based on the information below: 1.  In-N-Out plans to finance this expansion with a mix of 30% debt and 70% equity. 2.  In-N-Out’s equity beta is 0.7 3.  The market risk premium is 5%, the overnight (risk-free) borrowing rate is 3% and the 5-year Treasury bond (risk-free) rate is 4% 4.  In-N-Out Burger’s current bonds are rated AA-.  The credit spread on AA- rated bonds is 2%. 4.  During year 4 and afterward, assume that free cash flows calculated in year 3 grow perpetually at 3% per year (i.e., year 4 cash-flow is 3% more than year 3 cash-flow, year 5 cash-flow is 3% higher than year 4 cash-flow and so on).  As you know by now, the present value of growing perpetuities = (cash flow expected in the next period) / (discount rate – growth rate) Tax rate 35%

Briefly explain the concept of a stock’s Beta (market beta) to somebody who does not know finance (say, your favorite elementary school teacher).

Why do diversified portfolios usually have higher Sharpe ratios than investments in single assets?  

Calculate the cost of equity for  In-N-Out.  Show your calculations in your answer.

Consider two stocks.  The market beta of Stock A is 2, the market beta of Stock B is 1.  The risk-free rate is 3.5%, the market premium is 6%. Calculate the following items:  (0.5p each) (a) the expected return on Stock A (b) the expected return on Stock B (c) the expected return on a portfolio that has 60% of the portfolio’s value invested in Stock A and 40% in Stock B (d) the beta of the above portfolio.     

As you go through this quiz, be sure to read the directions for each question carefully.The point below has three statements that provide relevant, on-target support (and three that don’t!). Identify the three relevant statements of support.Point: I’m a perfect example of someone who has “math anxiety.”

For the question below, there are two paragraphs of support. One is clear, and the other is wordy, dull, or lacks sharp details. Identify the support paragraph that contains  sharp, clear details.Point: Public speaking is a challenge for many people.