Suppose that the operations of firm P closely resemble those of project X. The stock beta of firm P is 2.23 and its D/V ratio is 0.4. The marginal tax rate is 36%. The debt is assumed to be risk-free (i. e., debt beta is 0).

Project X is proposed to be financed by 50% equity and 50% debt, where the debt is assumed to be risk-free.

Calculate the beta to be used for determining the required rate of return on equity in the project.

a. 2.25
b. 2.55
c. 1.75
d. 1.56
e. 2.75

Michigan mattress company is considering the purchase of land and the construction of a new plant. the land, which would be bought immediately (at t = 0), has a cost of $100,000 and the building, which would be erected at the end of the first year (t = 1), would cost $500,000. it is estimated that the firm's afterminustax cash flow will increase by $100,000 starting at the end of the second year, and that this incremental flow would increase at a 10 percent rate annually over the next 10 years. what is the approximate payback period?

The returns on the common stock of maynard cosmetic specialties are quite cyclical. in a boom economy, the stock is expected to return 22 percent in comparison to 9 percent in a normal economy and a negative 14 percent in a recessionary period. the probability of a recession is 35 percent while the probability of a boom is 10 percent. what is the standard deviation of the returns on this stock?

Winston churchill's stamp collection was valued at $14 million when he died. at auction, it brought in only $4 million. what was it worth? why?