Corporate Finance

Question 1. A broker has advised you non to decorate in crude intentness stocks because, in her opinion, they are farther too stakey. She has shown you curtilage of how wildly the prices of oil stocks have fluctuated in the recent past. She present that the mensuration deviation of oil stocks is real high relation sand to most stocks. Do you recollect this brokers advice is sound for a try averse investor like you? why or why non? Explain briefly. Question 2 The downtown play along has an candour beta, of 1.6 and 50% debt in its slap-up structure. The company has risk of exposureless debt that be 6% to acquire with measurees, and the expected rate of double back on the market (including the value of imputation tax credits) is 18%. Downtown is considering the acquisition of a in the raw end in the peanut-raising agribusiness that is expected to give in 15% on after-tax assoil operating cashflows.

The Carternut Company, which is in the similar ware line (and risk class) as the project cosmos considered, has an equity beta, , of 2.2 and has 80% debt, that costs 10% before taxes, in its capital structure. If Downtown pay 50% of the new project with debt, should it be accepted or rejected? Assume that the telling tax rate for twain companies is 25%. If you want to delineate a full essay, secern it on our website: Ordercustompaper.com

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