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As a financial analyst, you are covering Singapore’s top commercial bank listed in the local bourse, which paid an annual dividend of $0.55/share on 31 December 2015. The expected return for the Singapore Straits Times Index is 3.8%. The risk free rate is 1.25% per annum.
(a) Your calculations show that this stock tracks the market index with a beta of 1.4. The annual dividend growth is estimated to be 2% per year, and is paid at the end of each year. How much would the bank’s share be valued at as of 1 January 2016?
(b) Due to its significant exposure to China’s economy, you are looking at scenario analysis and with the risk of a highly correlated global meltdown, you take the beta against the market index to be 2. While there is still an annual dividend growth of 0.5% per year, paid at the end of each year, you are now assuming zero dividend growth that from 1 January 2018 onwards, calculate the revised valuation of this stock as of 1 January 2016.
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 6 years ago. The bond currently sells for 80 percent of its face value. The book value of the debt issue is $19 million. The company's tax rate is 32 percent. What is the company's to..
As bond market interest rates increase, the value (i.e. price) of a fixed coupon interest rate bond (i.e. a typical corporate bond: A. Does not change B. Increases C. Decreases D. Insufficient information E. None of the above.
Metroplex Corporation will pay a $2.70 per share dividend next year. The company pledges to increase its dividend by 4.40 percent per year indefinitely. Required: If you require an 7.30 percent return on your investment, how much will you pay for the..
Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected on 60 days.
A five-year project has an initial fixed asset investment of $290,000, an initial NWC investment of $26,000, and an annual OCF of −$25,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
The firm plans to spend $100,000,000 on new capital projects. New bonds can be sold at par with an 8% coupon rate. Preferred stock can be sold with a dividend of $2.75, a par value of $25.00, and a floatation cost of $2.00 per share. Common stock is ..
Treasury bonds paying an 7.00% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually?
Suppose that a debt of $2200 with interest at i^(4) = 0.10 is amortized by payments of $500 at the end of each quarter for as long as possible. How many payments are made? What is the last payment? What is the total interest paid?
A company has favorable financial leverage when it uses borrowed funds to earn a higher rate of return than the rate of interest paid for the borrowed money.
Investors paid a total of $200,000 to acquire common stock in a firm. What is the book value of that firm? Which one of the following statements is correct concerning ratio analysis?
The Imaginary Products Co. currently has $300 million of market value debt outstanding. The 9 percent coupon bonds (semi-annual) have a maturity of 15 years and are currently priced at $1,440.03 per bond. If Imaginary is subject to a 40 percent margi..
App Inc plans to issue preferred stock with a perpetual annual dividend of 10% of par value and a par value of $25. If the required return on this stock is currently 8%, what should be the preferred stock’s market value?
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