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1. Crisp Cookware's common stock is expected to pay a dividend of $2.25 a share at the end of this year (D1 = $2.25); its beta is 0.95; the risk-free rate is 3.4%; and the market risk premium is 4%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $44 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years (i.e., what is )? Do not round intermediate steps. Round your answer to the nearest cent.
2. A stock is trading at $90 per share. The stock is expected to have a year-end dividend of $5 per share (D1 = $5), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g? Round the answer to three decimal places.
FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares sell for $29 per share, the preferred shares se..
Rate the three most important concepts that you learned in this course in order of importance. Propose two applications of knowledge that you have learned in this course to your current or a future position.
Suppose a particular investment project will require an initial cash outlay of $1,069,000 and will generate a cash inflow of $457,000 in each of the next three years. What is the project’s IRR? Suppose a company’s hurdle rate is 18%, should it accept..
A production project will generate an expected operating cash flow of $50,000 per year for 4 years (years 1 – 4). Undertaking the project will require an increase in the company’s net working capital (inventory) of $10,000 today (year 0). Sketch a ti..
Construct an argument in favor of investing in either the chosen company, or the competitor, with sufficient supportive detail and/or data to make your case.
Option to Wait Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $475,000 per year. The cost of the machine will decline by $210,000 per year until it reaches $2,270,000, where it will remain. If ..
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.56 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
What are the portfolio weights for a portfolio that has 135 shares of Stock A that sell for $84 per share and 110 shares of Stock B that sell for $82 per share?
Assume that managers of QVC Hospital are setting the price on a new outpatient service. Here are relevant data estimates: Variable cost per visit $25.00. Annual Direct Fixed Costs $750,000
A practice uses $40 worth of a dentist’s time, $30 worth of a hygienist’s time, $10 worth of supplies, and $15 worth of a billing clerk’s time to produce a visit. The practice charges a patient $25 and charges her insurer $70. The insurer spends an a..
What is the payments mechanism?- What changes are occurring in this mechanism? - Why are they occurring? How do smart cards differ from storedvalue cards?
What important factors, in addition to quantitative factors, should a firm consider when it is making a capital structure decision? How do these factors play in the decision?
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