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Calculating the Cost of Equity-Laverne Industries stock has a beta of 1.35. The company just paid a dividend of $.85, and the dividends are expected to grow at 5 percent. The expected return of the market is 11.5 percent, and Treasury bills are yielding 5 percent. The most recent stock price is $83.50. Required: (a) Calculate the cost of equity using the dividend growth model method. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Cost of equity % (b) Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Cost of equity %
Your firm has an average receipt size of $125. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,000 checks per day. The daily interest rate is .016 percent. The ..
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,030,000 and will be sold for $1,230,000 at the end of the project. If the tax rate is 34 percent, what is the after tax ..
If you buy a computer directly from the manufacturer for $3,050 and agree to repay in 36 equal installments at 1.72% interest per month on the unpaid balance, How much are your monthly payments?
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $840,000, and it would cost another $24,000 to install it. What is the Year-0 net cash flow? $ What are the ne..
Hippique s.a., which owns a stable of racehorses, has just invested in a mysterious black stallion with great form but disputed bloodlines.- Is this a risky investment for Hippique shareholders? Explain.
Suppose he S&P 500 index is 1100 and that it is possible to lend at 4% and borrow at 7%. Above what futures price is there arbitrage? Below what futures price is there arbitrage?
An engineer plans to borrow $25000 to open his own consulting business. He must repay $500 a month for 5 years. What is the nominal annual interest rate (compounded annually)?
A bond with 14.5 years to maturity paying a coupon on a semiannual basis will pay the coupon for: If the semiannual coupon payment on a bond with a face value of $1,000 is $24.76, the annual coupon rate is:
You estimate a company’s earnings and dividends will grow at a constant rate of 4% and want to determine the value of the stock. The company paid a dividend yesterday of $7 per share. The current10 year treasury rate is 2.3%, and the company’s beta i..
The last dividend paid by Florida Gator Inc. was $1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a constant rate of 6% forever. If the firm’s required return (Rs) is 11%, wh..
What types of decisions need to be made when healthcare companies are getting ready to make an investment and indicate the main kinds of information/data needed to evaluate this capital investment project?
An example of the growth factor in common stock is:
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