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  3. 1. yardie global is considering expanding a cruis

1. Yardie Global is considering expanding a cruise line division next year (t=1) or...

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Accounting

1.

Yardie Global is considering expanding a cruise line division next year (t=1) or waiting a year due to public health concerns. The cruise line has a discount rate of 11 percent and has an NPV today (t=0) of $40M. If they wait one year for market research, there is a 30 percent chance that the NPV next year (t=1) could be $150M and 70 percent chance that they will sell the division for $2M. What is the maximum they would pay for this research?

40M

1.80M

Nothing, they should not wait.

2.

Sea Wolves Solutions currently has 15M shares outstanding priced at $12 per share and 60K bonds outstanding priced at $200 per bond. The company has an equity beta of 0.8 and a debt beta of 0.15. What is the asset beta of the firm?

0.76

0.65

0.84

3.

All else equal, a firms equity beta will ___ with leverage because stockholders have a residual claim on the companys cash flows.

increase

decrease

not change

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