# Corporate Investment and Finance

**Question description**

- The market value of Charter Cruise Company's equity is $25 million, and the market value of its risk-free debt is $10 million. If the required rate of return on the equity is 12% and that on the debt is 7%, calculate the company's cost of capital. (Assume no taxes.)
- The market value of Charcoal Corporation's common stock is $40 million, and the market value of its risk-free debt is $15 million. The beta of the company's common stock is 1.45, and the market risk premium is 6%. If the Treasury bill rate is 4%, what is the company's cost of capital? (Assume no taxes.)
- The market value of XYZ Corporation's common stock is $140 million and the market value of the risk-free debt is $160 million. The beta of the company's common stock is 0.65, and the expected market risk premium is 5.5%. If the risk free rate 4%, what is the firm's cost of capital? (Assume no taxes.)
- You are given the following data for year-1. Revenue = $80; Cash operating cost (excluding depreciation expense) = $53; Depreciation = $13; Tax rate = 40%. Calculate the operating cash flow for the project for year-1.
- You are given the following data for year-1: Revenues = $350, Fixed costs excluding depreciation = $130; Total variable costs = 50% of revenues; Depreciation = $40; Tax rate = 30%. Calculate the after tax cash flow for the project for year-1.
- A project has the following cash flows:
C
_{0}= -200,000; C_{1}= 77,000; C_{2}= 115,000; C_{3}= 120,000. If the discount rate changes from 10% to 12%, what is the change in the NPV of the project (approximately)? - You have three stocks in your portfolio as follows: Amount Beta

Investment A 100,000 .7

Investment B 300,000 1.05

Investment C 50,000 1.45

What is the portfolio beta?

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