FINANCIAL MANAGEMENT

Financial Management Assignment



Financial Management Assignment

Question 1

Solution

Requirement A

ks = + g = + 7.0% = 9.30% + 70% = 16.30%.

Requirement B

ks = kRF + (kM - kRF)b

= 9.0% + (13.0% - 9.0%) 1.60 = 9.0% + (4.0%) 1.60 = 9.0% + 6.40%

= 15.40%.

Requirement C

ks = Bond rate + Risk premium = 12.0% + 4.0% = 16.0%.

Requirement D

The firm's cost of equity should be estimated to be about 15.9 percent, which is the average of the three methods (Brigham, 2010).

Question 2

Solution

Requirement A

Payback period = $52,125/$12,000 = 4.34 years

Requirement B

Project K's discounted payback period is calculated as follows:

Cash ...