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The Alpha Tool Corporation has never paid a dividend, but the new company president has announced that the firm would pay its first dividend exactly 2 years from now. That dividend is expected to be $2 per share. It is anticipated that this dividend will grow by 15 percent for the following 3 years and by 10 percent for the 2 years after that. No explicit dividend forecast is available beyond that point in time, although the firm is expected to continue to pay some dividends every year. The stock's current price/earnings (P/E) multiple is 15 times. The company (and investi- gators) expect the P/E multiple to remain constant for the foreseeable future. Earn- ings per share at the end of year 6 are expected to be $7. The company's marginal tax rate is 40 percent and the firm has a capital structure consisting of 40 percent debt (at a pretax cost of 20 percent) and 60 percent common equity. If you require a 15 percent rate of return on this stock, how much would you pay for one share of stock today?
from books of aggarwal bors following information has been extracted rs. sales 240000 variable costs 144000 fixed costs
Consider an asset that costs $675,500 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a four-year project; at the end of the project, the asset can be sold for $136,900.
A stock that went from $43 per share at the beginning of the year to $47 at the end of the year and paid a $3 dividend provided an investor with a return of ____%: (Keep two decimals)
Maggie wins the lottery and is awarded 500,000 at the beginning of each quarter for the next 20 years. The government takes 40% of her winnings and she spends 90% of what is left. At the end of 20 years the accumulated value in the account is used to..
Calculate the tax disadvantage to organizing a U.S. business today as a corporation, as a compared to a partnership, under the following conditions. Assume that all earnings will be paid out as cash dividends.
Edwards Construction currently has debt outstanding with a market value of $90,000 and a cost of 11 percent. The company has EBIT of $9,900 that is expected to continue in perpetuity. Assume there are no taxes. What is the value of the company's equi..
Calculate straight-line depreciation and calculate operating cash flows - estimated project cash flows be changed to reflect these interest charges
Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisio..
If the error resulted from Mr. Stanhope's intentional disregard of a tax rule, compute the negligence penalty. Should the fact of Mr. Stanhope's education and business experience in sequence the agent's decision to impose the negligence penalty?
Explain how the forward market for foreign exchange differs from the spot market. When will forward exchange rates be at a premium or discount to spot exchange rates?
Brendan was given a gold coin originally purchased for $1 by his great grandfather 50 years ago. Today the coin is worth $450. Determine the rate of return (interest rate) realized from the original $1 investment to the future value of $450. (You are..
An investor, Terry Noirs, is in the 40% tax bracket and has been contemplating investing in corporate bonds. After a recent stay at the Eiffel Payne Hospital, a not-for-profit hospital, he learned that they will be issuing tax-exempt bonds for a majo..
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