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Do any of the four companies in Problem change dividends over the last five years? Do dividends change (in the same direction) every time earnings change? What does this say about a manager's expectations of changes in company earnings?
ProblemIt is January 1, 2009. Boomer Equipment Company (BEC) currently has assets of $250 million and expects to earn a 10 percent return on assts during the year. There are 20 million shares of BEC stock outstanding. The firm has an opportunity to invest in a (minimally) positive-NPV project that will cost $25 million over the course of 2009.
BEC needs to determine whether it should finance this investment by retaining profits over the course of the year or pay the profits earned as dividends and issue new shares to finance the investments.
Show that the decision is irrelevant in a world of frictionless markets.
Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected.
Hurley Co. has outstanding $8 million face amount of 9% bonds that were issued on January 1, 2004, for $7,760,000. The 20-year bonds mature on December 31, 2023, and are callable at 102 (that is, they can be paid off at any time by paying the bondhol..
What is the maximum price you would pay for a common stock given that the risk free rate of return is 4%, the current dividend is $6.00, the return on the average stock in the market is 11%, the growth rate in dividends for the stock is 4% per year, ..
The First National Bank Sells automobile loans to a separate entity known as Auto Finance Partners (AFP). AFP is financed with 89% debt and 11% equity issued to an independent investor. First National Bank’s risk is virtually nonexistent. Are AFP and..
Find the current value per share of Suarez Manufacturing's common stock.- What effect would the proposed investment have on the firm's stockholders? Explain.
Identify the macro sovereign risks and problems and their potential effect on QN's competitive advantage (in fact QN has not established what its competitive advantage really is, though it has been very successful in the UK and the euro area).
ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $20,674 and shipping and installation costs are another $1,082. The project will also require an initial $4,904 investment in net working capital. The..
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $495,000 is estimated to result in $194,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Ta..
You are considering lending the Biqing Company $35,000 for seventy days. The financial ratios you would probably be MOST interested in are
What is the expected risk- free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent? Expected return of Stock = risk- free rate of return + Beta*( expected market return -..
Louise Manufacturing uses 1,700 switch assemblies per week and then reorders another 1,700. The relevant carrying cost per switch assembly is $6.00, and the fixed order cost is $850. What are the current carrying costs? Calculate the economic order ..
What specific items of capital should be included in a corporate cost of capital estimate? Should historical (embedded) or new (marginal) values be used? Why? What is your final estimate for Southeastern’s cost of equity? Explain your answer. What is..
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