A firm's weighted average cost of capital before tax (##r_\text{WACC before tax}##) would increase due to:
The US firm Google operates in the online advertising business. In 2011 Google bought Motorola Mobility which manufactures mobile phones.
Assume the following:
- Google had a 10% after-tax weighted average cost of capital (WACC) before it bought Motorola.
- Motorola had a 20% after-tax WACC before it merged with Google.
- Google and Motorola have the same level of gearing.
- Both companies operate in a classical tax system.
You are a manager at Motorola. You must value a project for making mobile phones. Which method(s) will give the correct valuation of the mobile phone manufacturing project? Select the most correct answer.
The mobile phone manufacturing project's:
You have just sold an 'in the money' 6 month European put option on the mining company BHP at an exercise price of $40 for a premium of $3.
Which of the following statements best describes your situation?
What is the Internal Rate of Return (IRR) of the project detailed in the table below?
Assume that the cash flows shown in the table are paid all at once at the given point in time. All answers are given as effective annual rates.
Project Cash Flows | |
Time (yrs) | Cash flow ($) |
0 | -100 |
1 | 0 |
2 | 121 |
Let the variance of returns for a share per month be ##\sigma_\text{monthly}^2##.
What is the formula for the variance of the share's returns per year ##(\sigma_\text{yearly}^2)##?
Assume that returns are independently and identically distributed (iid) so they have zero auto correlation, meaning that if the return was higher than average today, it does not indicate that the return tomorrow will be higher or lower than average.
A credit card company advertises an interest rate of 18% pa, payable monthly. Which of the following statements about the interest rate is NOT correct? All rates are given to four decimal places.
Question 833 option, delta, theta, standard deviation, no explanation
Which of the following statements about an option (either a call or put) and its underlying stock is NOT correct?
Question 920 SML, CAPM, Sharpe ratio, Treynor ratio, Jensens alpha, no explanation
Over-priced assets should NOT: