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Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next seven years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $14.25 per share dividend in year 8 and will increase the dividend by 6.00 percent per year thereafter.
Required:
If the required return on this stock is 14.00 percent, what is the current share price?
Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project...
Find an announcement of new information made within a month from today (i.e., earnings announcement, merger, etc.) for any publicly traded stock that moves the stock price at least 1%. Is the stock market reaction consistent with the strong form of m..
A mutual fund manager has a $20 million portfolio with a beta of 1.15. The risk-free rate is 5.50%, and the market risk premium is 5.0%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After i..
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,170,000 and will be sold for $1,370,000 at the end of the project. If the tax rate is 30 percent, what is the aftertax s..
Teresa’s Tanning Salon expects annual sales of $175,000, annual fixed cash outlays are $57,000 a year at each location, variable cash outlays are 22 percent of sales, depreciation is $15,000 per year, and taxes are 32% (of pretax income). Initial out..
In a slow year, Deutsche Burgers will produce 3.2 million hamburgers at a total cost of $3.4 million. In a good year, it can produce 4.8 million hamburgers at a total cost of $4.6 million. What are the variable and fixed costs of hamburger production..
Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $26 million, a maturity of 15 years, and a yield to maturity of 8%. What is the before-tax cost of debt for Olympic? What is Olympic's after-tax cost of ..
Donald and Gabby are going to invest some of their money for two years from January 1, 2016 to December 31, 2017. Use 2016 rates, etc for both 2016 and 2017. Their taxable income without any return is $200,000. They will invest $55,720 for two years,..
What are the monthly payments (principal and interest) on a 15-year home mortgage for an $180,000 loan when interest rates are fixed at 8 percent?
When computing the price of a stock with the dividend discount model, how would the price be affected if the required rate of return is increased?
You plan to open a retirement account. Your employer will match 50% of your deposits up to a limit on the match of $2, 500 per year. You believe the retirement account will earn 12 % per year over the next 30 years.
The current spot exchange rate between the dollar and the Swiss franc (CHF) is $0.61/CHF. What is the expected future spot rate for the CHF in 3 years?
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