Blog

Below, you will find a diagram of the current security market line.  As you can see, Stock A is currently being priced out of the equilibrium.  Briefly tell me whether it is currently overvalued or undervalued, and what will cause it to return to the equilibrium in an efficient market?

The market value of Charcoal Corporation’s common stock is $20 million, and the market value of its risk-free debt is $5 million.  The beta of the company’s common stock is 1.25, and the market risk premium is 8%.  If the T-bill rate is 5%, what is the company’s weighted average cost of capital? (Assume no taxes.)

You took out your home mortgage five years ago, and are currently considering refinancing into a loan at a lower rate and for a shorter term.  Your original loan was for 30 years, at 6% interest on the $200,000 borrowed, and you pay monthly.  The new loan you are considering will be for 15 years at a rate of 4%.  Again, the payments will be monthly.  What will your new payment be if you take on this new loan?

You will have 40 minutes to complete the following: One fully developed body paragraph Quotation embedded correctly MLA citation

Each of the next four questions require multiple steps to solve.  So if you come up with an answer in one step, you have did it incorrectly.  I do give partial credit for these, if I can figure out where you went off track.  So please show me the keystrokes for each part of the question, and all intermediate answers.

You took out your home mortgage five years ago, and are currently considering refinancing into a loan at a lower rate and for a shorter term.  Your original loan was for 30 years, at 6% interest on the $200,000 borrowed, and you pay monthly.  The new loan you are considering will be for 15 years at a rate of 4%.  Again, the payments will be monthly.  What will your new payment be if you take on this new loan?

You are purchasing a new car for $14,000, and have been given a promotional offer by the dealership which allows you to purchase the vehicle using 1% APR financing on a 60 month loan.   You had planned on using your credit union, which had agreed to finance the car at 6% interest, but you certainly now prefer to accept the dealership’s offer.  Given this promotional rate, what is the true cost of this car for you?

You will have 40 minutes to complete the following: Draft a quick outline of your story Draft at least one paragraph Skip a few lines down and write your thesis (the lesson you learned)

What is the value of the depreciation tax shield in year 3 of the project? 

The following questions are multistep questions.  You will need to calculate all parts of it to receive full credit.  However, show your work and all partial calculations for partial credit.