One key conclusion of the Capital Asset Pricing Model is that the value of an asset should be measured by considering both the risk and the expected return of the asset, assuming that the asset is held in a well-diversified portfolio. The risk of the asset held in isolation is not relevant under the CAPM.
Answer the following statement true (T) or false (F)
True
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Which of the following is a factor that distinguishes social sciences, such as psychology and sociology, from ethics?
A. Unlike ethics, these disciplines give directives about how people should act. B. Unlike ethics, these disciplines inquire why people act the way they do. C. Unlike ethics, these disciplines provide an account of how people should act. D. Unlike ethics, these disciplines are normative rather than descriptive.
Rebecca is one of the few reliable programmers of her organization who is authorized to work on a closed source project. The project will be especially useful to track the progress of outsourced activities. Which of the following statements is most likely to be TRUE of Rebecca's project?
A. Only users and developers will be allowed to alter the source code of the project. B. The source code will eventually be made open source. C. Only trusted programmers will be allowed to make changes to the project. D. Programmers could alter the source code based on their interests and goals. E. Anyone could obtain the source code for the project.
Valley Flights, Inc has a capital structure made up of 40% debt and 60% equity and a tax rate of
30%. A new issue of $1,000 par bonds maturing in 20 years can be issued with a coupon of 9% at a price of $1,098.18 with no flotation costs. The firm has no internal equity available for investment at this time, but can issue new common stock at a price of $45. The next expected dividend on the stock is $2.70. The dividend for the firm is expected to grow at a constant annual rate of 5% per year indefinitely. Flotation costs on new equity will be $7.00 per share. The company has the following independent investment projects available: Project Initial Outlay IRR 1 $100,000 10% 2 $10,00 8.5% 3 $50,000 12.5% Which of the above projects should the company take on? A) Projects 1 and 3 B) Project 3 only C) Projects 1 and 2 D) Projects 1, 2 and 3
Korver Inc. just paid a dividend of $0.73. Its stock has a dividend growth rate of 5.62% and a required return of 10.21%. What is the current stock price if we anticipate dividends stopping in 20 years?
A) $8.62 B) $9.62 C) $10.62 D) $11.62