Coursera online course Corporate Finance Essentials Answers

Here is coursera course Corporate Finance Essentials quiz solution. It is online course which is offered by
the Coursera.

Quiz 1
8 questions answers
1. Consider the returns of the MSCI index of developed markets equity in column C of the Excel
file that goes with this quiz. Given the returns over the 1988-2013 period, what has been the
arithmetic mean annual return of these markets?
9.7%
2. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel
file that goes with this quiz. Given the returns over the 1988-2013 period, what has been the
arithmetic mean annual return of these markets?
17.6%
3. Consider the returns of the MSCI index of developed markets equity in column C of the Excel
file that goes with this quiz. Given the returns over the 1988-2013 period, what has been the
geometric mean annual return of these markets? Question text
7.9%
4. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel
file that goes with this quiz. Given the returns over the 1988-2013 period, what has been the
geometric mean annual return of these markets?
12.1%
5. Consider the returns of the MSCI index of developed markets equity in column C of the Excel
file that goes with this quiz. Given the returns over the 1988-2013 period, what has been the
standard deviation of annual returns (volatility) of these markets?
18.0%
6. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel
file that goes with this quiz. Given the returns over the 1988-2013 period, what has been the
standard deviation of annual returns (volatility) of these markets?
34.7%

7. Consider the returns of the MSCI index of developed markets equity in column C of the Excel
file that goes with this quiz. If you had invested $100 in these markets at the very beginning of
1988, how much money would you have at the end of 2013?
$729
8. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel
file that goes with this quiz. If you had invested $100 in these markets at the very beginning of
1988, how much money would you have at the end of 2013?
$1,956

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Corporate Finance Essentials quiz 2 solution. It
is online course which is offered by the
Coursera.
Correlation and Diversification
Quiz 2
1. Consider the returns of the MSCI indexes of developed and emerging markets equity in columns C
and D of the Excel file that goes with this quiz. Given the returns over the 1988-2013 period, what has
been the correlation between these markets?
0.67
2. Consider the returns of the MSCI index of developed markets equity in column C of the Excel file
that goes with this quiz. Given the returns over the 1988-2013 period, and the arithmetic mean return and
volatility you calculated in the first quiz (which you could also recalculate now if necessary), what has
been the ‘quick-and-dirty’ risk-adjusted return of these markets?
0.54
3. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel file that
goes with this quiz. Given the returns over the 1988-2013 period, and the arithmetic mean return and
volatility you calculated in the first quiz (which you could also recalculate now if necessary), what has
been the ‘quick-and-dirty’ risk-adjusted return of these markets?
0.51
4. Which one of the statements below is false?
The correlation between two assets can only be a positive number.
5. Which one of the statements below is true?
When two assets with a correlation lower than 1 are combined into a portfolio, the volatility of the
portfolio is lower than the weighted-average volatility of the two assets.
6. Of the five options below, select the one that incorrectly completes the following sentence:
“Diversification can help investors …
to always be fully exposed to the best performing asset.”
7. Which one of the statements below is false?
Spanish investors have nothing to gain from diversifying into a risky market like China.
8. Which one of the statements below is true?
In the long term, the correlations across global equity markets tend to be positive.

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Corporate Finance Essentials the CAPM and
the Cost of Capital Coursera quiz Answers
The CAPM and the Cost of Capital
Quiz 3
Answers are given here
1. What is Bull’s net income? $162.5 million
2. What is Bear’s net income? $146.9 million
3. What is the tax shield that Bear obtains because of its debt? $8.4 million
4. Assuming that the required return on Bear’s debt is currently equal to its interest rate of 6%, what is this
company’s after-tax cost of debt? 3.9%
5. Which one of the statements below is true?
The inputs of the CAPM can be estimated in a wide variety of ways.
6. Of the five options below, select the one that incorrectly completes the following sentence: “The weighted-
average cost of capital …is always based on weights of 50% debt and 50% equity.”
7. Which one of the statements below is false? The cost of debt is typically higher than the cost of equity.
8. Which one of the statements below is true? The yield to maturity of a coupon bond changes whenever
the bond’s price changes.

Quiz 4
Consider Rhye, amid-size pharmaceutical company. Rhye’s equity has a book value of $2.8
billion and a market value of $19.4 billion. Rhye’s debt, on the other hand, has a book
value of $500 million and a market value of $600 million; the debt’s annual interest rate
and yield to maturity are 6% and 5%, respectively. Currently, Rhye has a beta of 1.2 and
faces a corporate tax rate of 35%. Also currently, the yield to maturity on 10-year U.S.
Treasury Notes is 2.5%. The market risk premium remains around its historical average of
5.5%.
Answers are given here

1. 5% 2. 97%
3. 3.25% 4. 3.3%
5. 9.1% 6. Market Value (Last Word)
7. 3% 8. 10% Return (Last Word)

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 Quiz 5
Consider the investment opportunity below, which consists of a high-end clothing store inside a large and
popular shopping mall. The project requires an upfront investment of $40 million and has the expected annual
cash flows shown in Exhibit 1. The company’s hurdle rate is 8%.
Exhibit 1 (In Millions of $)
Year 0 1 2 3 4 5

Panel A -$40.0 $6.2 $10.0 $12.8 $16.6 $22.4

Panel B -$40.0 $6.2 $10.0 $12.8 $16.6

1. 11.9m 2. 16.7%
3. -3.3m 4. 4.7%
5. The Cash Flow of Panel B 6. 47.5% and 35%
7. 68.2m &90.9m 8. Invest in Project B

Quiz 5
Consider two companies, Stars and Stripes. Last year, Stars produced a NOPAT of $85 million with $500
million of invested capital, on which providers require a return of 12%. Stripes produced a NOPAT of $90
million with $900 million of invested capital, on which providers require a 15% return.
1. 17% 2. 10%
3. 60m 4. 135m
5. 25m 6. -45m
7. Last years, Stars created value 8. Last years, Strips destroy value

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