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COMM1180-Value Creation T3 2025
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A portfolio consists of 20% common shares, 50% bonds, and 30% cash. Calculate the portfolio return if the return on common shares, bonds, and cash are 20%, 10%, and 2%, respectively.
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Because investors can eliminate non-systematic risk by diversifying their portfolios sufficiently, they __________ a risk premium for bearing it.
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Given a market risk premium of 10% and a risk-free rate of 4%, what is the fair expected return for shares of Tesla with a beta of 1.2?
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Which of the following best describes the value of an ordinary share using the Dividend Discount Model (DDM)?
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Crystal Limited has issued perpetual preferred shares that entitle investors to an annual 4% dividend on the face value of $50 per share. This face value does not change. Compute the share price if the current discount rate is 10% p.a.
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Mars Limited share is expected to pay a dividend of $1 in one year. The expected selling price of this share is $30 in one year. Calculate the share price today if the required return on investment is 6% p.a.
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In the Gordon Growth Model, the share price at the beginning of the second year can be computed as:
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When a bond is traded at a price above its face value, it is called a __________.
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Project A and Project B are mutually exclusive projects. Both projects have a cost of capital of 10%. Project A has an internal rate of return of 12%, and Project B has an internal rate of return of 14%. Given this information, an investor should probably invest in which project(s)?
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A technology firm is comparing two computer servers. Server A costs $10,000 and lasts 4 years; Server B costs $18,000 and lasts 7 years. Both yield the same annual cost savings of $6,000. The discount rate is 10% p.a. Which evaluation method would be most suitable?
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