A stock is said to be under the following circumstance: the stock has a higher required return (according to the CAPM), than the return an investor could earn by paying the current stock price [and experiencing the cash flows that ownership of the stock produces].

When selecting stock, some financial experts recommend to look at the opening price go with what you know examine the day’s range, earnings per share, and p/e ratio divide the dividend by the asking price

Burke enterprises is considering a machine costing $30 billion that will result in initial after-tax cash savings of $3.7 billion at the end of the first year, and these savings will grow at a rate of 2 percent per year for 11 years. after 11 years, the company can sell the parts for $5 billion. burke has a target debt/equity ratio of 1.2, a beta of 1.79. you estimate that the return on the market is 7.5% and t-bills are currently yielding 2.5%. burke has two issuances of bonds outstanding. the first has 200,000 bonds trading at 98% of par, with coupons of 5%, face of $1000, and maturity of 5 years. the second has 500,000 bonds trading at par, with coupons of 7.5%, face of $1000, and maturity of 12 years. kate, the ceo, usually applies an adjustment factor to the discount rate of +2 for such highly innovative projects. should the company take on the project?

Post test question number 9 for entering the job market