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In 2013, the Lissa Company paid dividends of $10,000,000 on after-tax income (cash flow) of $25,000,000. Capital budget projects totaled $15,000,000 in 2013. 2013 was a normal year for earnings, dividends, and capital budgets. For the past 12 years, earnings have grown at a constant rate of 8%. However, in 2014, earnings are expected to fall to $20,000,000 and the firm expects to have profitable investment opportunities will grow to 18,000,000. It is predicted that Lissa will not maintain the 2014 level of earnings growth, and the company will return to the 2013 earnings (25,000,000) and growth rate (8%) in 2015. Lissa’s target market value leverage ratio is 50% and it is at the target. a. Calculate Lissa's total dividends for 2014 if its dividend payment is set to force dividends to grow at the long-run growth rate in earnings. b. Calculate Lissa's total dividends for 2014 if it continues its 2013 dividend payout ratio. c. Calculate Lissa's total dividends for 2014 if it uses a pure residual dividend.
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,610,000. The fixed asset falls into the three-year MACRS class (MACRS Table). Assume that the tax rate is 40 percent and the requi..
The table below gives the exchange rates between U.S. dollar, British pound and Swedish krona. What is the exchange rate between Swedish kronas and pounds?
The capital asset pricing model approach to equity valuation:
Which of the following is not a correct statement about financial statements? Revenue refers to increases in a firm’s assets resulting from the sale of stocks, or other activities intended to earn income. Expenses are resources used up as the result..
Suppose that a firm that operates in a perfect world has assets worth $12,000, no debt,, and 300 shares outstanding. If this firm pays a dividend of $6.50 to each shareholder, what will the share price be after the dividend is paid?
You have the chance to receive $700 at the end of 2 years. a) If you can earn 5% on similar risk investments, what is the most you should be willing to pay today for this investment (i.e., today's value)? b) If you pay $650 today would you be earning..
You buy a share of stock, write a one-year call option with a strike price X = $11, and buy a one-year put option with a strike price X = $11. Your net initial cost to establish the entire portfolio is $10.50. What must be the risk-free interest rate..
Canyon Tours showed the following components of working capital last year: Beginning End of Year Accounts receivable $26,200 $24,100 Inventory 13,100 14,700 Accounts payable 15,600 18,700 a. What was the change in net working capital during the year?..
A bond that settles on June 7, 2013, matures on July 1, 2033, and may be called at any time after July 1, 2023, at a price of 141. The coupon rate on the bond is 6.6 percent and the price is 155.50. What is the yield to maturity and yield to call on ..
what makes doing business in europe interesting? the paper should integrate 4-6 citations and will be evaluated on
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 5%. What is the terminal, or horizon, value ..
Tampa Manufacturing, an established producer of printing equipment, expects its sales to remain flat for the next 3 to 5 years because of both a weak economic outlook and an expectation of little new printing technology development over that period. ..
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