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If a firm’s beta is 1.3, the risk-free rate is 5%, and the expected return on the market is 9%, what will be the firm’s cost of equity using the CAPM approach?

If the inflation increases, then _____________; If average investor becomes more risk averse, then ___________________.

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$14,000 $6,900 $4,600 $6,200 $5,900 Calculate the project’s profitability index (PI).

Li & Sons’ common stock currently trades at $70 a share.  It is expected to pay an annual dividend of $2.45 a share at the end of the year (D1 = $2.45), and the constant growth rate is 7.9 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?

Helen recently received a credit card with a nominal interest rate of 21 percent.  With the card, she purchased some new clothes for $450.  The minimum payment on the card is only $15 per month.  If Helen makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

The coupon rate of a bond equals:

A firm’s bonds have a maturity of 19 years with a $1,000 face value, a 13 percent semiannual coupon, are callable in 5 years at $1,095, and currently sell at a price of $1,185.  What is their yield to call (YTC)?

An investment will pay $900 at the end of each of the next 3 years, $1,100 at the end of Year 4, and $1,400 at the end of Year 5.  What is its present value if other investments of equal risk earn 8 percent annually?

Suppose you invest $3,200 today in an account that earns a nominal annual rate (inom) of 12 percent, with interest compounded monthly.  How much money will you have after 10 years?

The Herron Company’s cost of common equity is 13 percent, its before-tax cost of debt is 10 percent, and its marginal tax rate is 30 percent.  Given Herron’s market value capital structure below, calculate its WACC. Long-term debt $29,000,000 Common equity   51,000,000 Total capital $80,000,000