FIN622 current mid paper

On Sat, Dec 8, 2012 at 8:01 PM, Hijaab <abremeherban@gmail.com> wrote:

Q---1

Projects

Security X

Security Y

Marks --- 3

Beta

0.8

2

Standard deviation

0.4

0.3

1. Which security is defensive and why?

2. Whish security has greater unsystematic risk and why?

3. Which security requires more risk premium and why?

Q---2

Q---3

Why calculation of common stock is difficult than bonds? Marks --- 3

Expected rate of return on market portfolio 14%

T-bills yield 6%

Expected return (investor) 10%

Calculate Beta of stock=?

Marks --- 3

Q---4

Interest tax shields are valuable, why don't all taxpaying firms borrow as much as

possible. Marks --- 5

Q---5

Marks --- 5

Projects

W

X

Y

Z

1. Calculate NPV.

2. Rank projects according to NPV and calculate total NPV of selected projects.

Initial investment

(50000)

(100000)

(85000)

(96000)

PV of cash flows

65000

120000

113000

105000

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سبحان الله وبحمده  سبحان الله العظيم.

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