FIN 300 Study Guide - Final Guide: Reserve Requirement, Asset Turnover, Risk Premium

• School: Ryerson University
• Department: Finance
• Course: FIN 300
• Professor: Laleh Samarbakhsh

Document Summary

E(ri) = rf + [e(rm ) rf ] x bi. E(rm )= [e(ri) rf / bi] + rf. Portfolio weight for a stock = (shares)(price per share) / (total port. value) Bi = beta (stays as is i. e. , 0. 8) Wc=3764170/5 mil = 0. 752834 i. e. , 5 mil investment. Cash low from assets(cffa) = ocf + net capital spending+change. Cffa= cash paid to bondholders + cash paid to shareholders. Cffa = ocf changes to nwc net capital in net working capital i. e. , finance. inc had cffa of k. It paid k in interest to its bondholders and made no pmts on the principal or issue any new debt. They paid in div. to its common shareholders. Proitability index = pv cash inlows / initial investment. Portfolio beta=(0. 25)(1)+(0. 25)(2)+(0. 50)(0)=0. 75 i. e. , the risk-free rate is 4% per year and the mkt. risk premium is 5% per year. The beta of xyz corp common shares is 1. 2.