Expecting a period of intense growth

Assignment Help Financial Management
Reference no: EM131446726

a) You hold $25,000 in Treasury Bills with your broker. You ask him to short 1,000 shares of Bomb-Bar-Day, and the stock’s current market price is $50. Your broker has a short sale maintenance margin of 30%. You will get a margin call if the stock ...

b) Black Kat Inc. is expecting a period of intense growth, so it has decided to retain more of its earnings to help finance that growth. As a result it is going to reduce its annual dividend by 10% a year for the next three years. After that it will maintain a constant dividend of $0.75 a share. The company just paid a dividend of $1.80 per share. What is the market value of this stock if the required rate of return is 13%?

c) The effective annual required rate of return on the ordinary shares of Southeast Corporation is 18%. The shares' expected dividend yield for year one is 4%. The shares' annual dividends are expected to grow at a constant annual rate forever. Whats the expected annual dividend growth rate?

d) You purchased a stock one year ago for $91.20. Today you sold the stock and realized a total return of –63.7% on your investment. During the year you received a total of $2.28 in dividends. At what price did you sell the stock?

e) Beaksley, Inc. is a very cyclical type of business which is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year. The most recent dividend was just paid today. Five years from now, the company is repurchasing all of the outstanding shares at a price of $50 a share. At an 8% rate of return, what is this stock worth today?

f) NanTech Corporation's next dividend is expected to be $1.75. Dividend growth has been a consistent 7% per year. If investors want a 12% return, determine the stock price 5 years ago.

Reference no: EM131446726

Questions Cloud

Strength and weaknesses of company sales-profitability : Choose a publicly traded company. Download the latest available financial reports (balance sheet, income statement, statement of cash flows, and statement of owners' equity). What is your overall opinion about the strength and weaknesses of this comp..
How much will each annual payment be : You need to accumulate $119,538 for your son’s education. You have decided to place equal year-end deposits in a savings account for the next 17 years. The savings account pays 6.46 percent per year, compounded annually. How much will each annual pay..
Calculate the return on your investment in usd : You have just sold shares in Credit Suisse, a Swiss firm, for CHF10,040 (or 10,040 Swiss Francs). You purchased this parcel of shares for CHF6,400. The spot rate is currently CHF/USD1.70 (or 1.70 Swiss Francs per US dollar). It was CHF/USD1.88 per do..
Annual interest rate and exchange rate : At the start of 2006, the annual interest rate was 5 percent in the United States and 2.8 percent in Japan. The exchange rate was 95 yen per dollar at the time. Mr. Jorus, who is the manager of a Bermuda-based hedge fund, thought that the substantial..
Expecting a period of intense growth : Black Kat Inc. is expecting a period of intense growth, so it has decided to retain more of its earnings to help finance that growth. As a result it is going to reduce its annual dividend by 10% a year for the next three years. After that it will mai..
Considering new three-year expansion project : Mercy Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life.
What is the amount of each mortgage payment : You purchased a piece of property for $1,056,000. The loan terms require monthly payments for 10 years at an annual rate of 4.75%. What is the amount of each mortgage payment?
What return are shareholders expecting : A company recently paid a $1.15 dividend. The dividend is expected to grow at a 16.9 percent rate. At a current stock price of $45.87, what return are shareholders expecting?
Determine the current and predicted-revenues-variable costs : Janet Gilbert is director of a lab. She has some extra capacity and has contracted with some small neighboring hospitals to run some of their lab tests. She has recently had a study conducted and has determined that her costs for these contracts are ..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Does this suggest an investment strategy

Calculating Future Values. You have just made your first $5,000 contribution to your individual retirement account. Assuming you earn a 10.1 percent rate of return and make no additional contributions, what will your account be worth when you retire ..

  Decide between two different conveyor belt systems

Eads Industrial Systems Company (EISC) is trying to decide between two different conveyor belt systems. System A costs $538,000, has a 4-year life, and requires $133,000 in pretax annual operating costs. System B costs $630,000, has a five-year life,..

  Bond with coupon rate

You buy a 20-year bond with a coupon rate of 8.8% that has a yield to maturity of 9.8%. (Assume a face value of $1,000 and semiannual coupon payments.) Six months later, the yield to maturity is 10.8%. What is your return over the 6 months?

  What are your disability insurance needs

What steps have you taken or will you take to ensure that your health insurance needs are being met? Which type of health insurance plan will you seek from your employer?

  Bond is current yield better estimate of yield to maturity

Two bonds have 10 years to maturity. Bond A has a coupon rate of 2.45% and a price of 99.805 (% of FV). Bond B has a coupon rate of 5.90% and a price of 105.214 (% of FV). The bonds make semi-annual coupon payments. Which bond is selling at a premium..

  Requires an initial cash outlay

AXY requires an initial cash outlay of $675,000 for equipment. You expect to spend an additional $45,000 in the first year to cover costs as the project will produce negligible cash inflows for that year. During years 2 through 6, you expect to recei..

  What other factors might be important in your analysis

What is the probability that this project will be acceptable to BBW, if the goal is to maximize shareholder wealth? What other factors might be important in your analysis? Be specific.

  Explain how to observe beta of an all-equity firm

Explain how to observe beta of an all-equity firm that is publicly listed. Suppose the dataset is short or polluted with some special events, how can you make the estimate more reasonable/robust?

  Federal reserve begins to raise interest rates

The U.S. Federal Reserve has kept interest rates at a very low level for the last 5 years. How do you think these low interest rates affect the price of U.S. stocks? What do you think will happen to the value of U.S. stocks when the U.S. Federal Rese..

  Calculate investors required rate of return today

(Bonds) A company has an outstanding issue of $1,000 face value bonds with a 9.5% annual coupon and 20 years remaining until maturity. The bonds are currently selling at a price of 90 (90% of face value). An investment bank has advised that a new 20-..

  What is its expected return of company

Your financial plan tells you that you desire investments that have the potential to return 7%. Suppose the risk-free return is 3% and the market portfolio has an expected return of 7% and a standard deviation of 9.6%. Company A stock has a beta of 0..

  Cottonwood received their new product catalogs ordered

Cottonwood received their new product catalogs ordered from a local print shop. The print shop billed Cottonwood $6,000 for 5,000 catalogs with payment terms of net 10.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd