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Business Services, Inc. is expected to pay its first annual dividend of $0.80 per share three years from now. Starting in year six, the company is expected to start increasing the dividend by 4 percent per year. What is the value of this stock today at a required return of 12 percent?
Firm A has EBIT of $400,000, Earnings before Taxes of $280,000, and Earnings after Taxes of $168,000. What is the AFTER-TAX cost of the Firm's interest expense?
Susan wants to buy a house for $200,000. US Bank will give her the loan at 3.5% for 30 years if she puts 20% down and Dacotah Bank will give her the loan at 3.8% for 30 years if she puts 10% down. There are NO other options. which loan should she sig..
McCue Inc.'s bonds currently sell for $1,025. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and r..
Stock R has a beta of 1.3, Stock S has a beta of 0.8, the expected rate of return on an average stock is 13%, and the risk-free rate of return is 7%. By how much does the required return on the riskier stock exceed the required return on the less ris..
Which of the following should be included in the initial outlay?
Savings institutions are exposed to credit risk as a result of their heavy concentration in mortgages, mortgage-backed securities, and other securities.
You recently approached your bank about establishing a credit line facility. The terms offered by your bank include a nominal rate of prime + 1.5% (prime is currently 5%) on the amount borrowed, a commitment fee of 25 basis points on the unused porti..
YIELD CURVES Suppose the inflation rate is expected to be 7% next year, 5% the following year, and 3% thereafter. Assume that the real risk-free rate, r*, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very..
You want your portfolio beta to be 0.90. Currently, your portfolio consists of $4,000 invested in stock A with a beta of 1.47 and $3,000 in stock B with a beta of 0.54. You have another $9,000 to invest and want to divide it between an asset with a b..
Assume you sell 100 shares of Larson Corporation short at $61. You also buy a 60 call option for $3.5 to protect against the stock price going up. What is the most you can lose under this short sale-call option plan? If you have an unprotected short ..
Selected yearend financial statements of Cabot Corporation follow, all sales were on credit selected balance sheet amounts at December 31, 2012 were inventory; $52,900; total assets; 229,00; common stock 105,000 and retains earning 52, 548.
The management of Kobler Corporation is investigating an investment in equipment that would have a useful life of 5 years. The company uses a discount rate of 10% in its capital budgeting. Ignoring any salvage value, to the nearest whole dollar how l..
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