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What is the value of equity? Stock price (or market cap)? Or a sort of book value?
Union Pacific Railroad reported net income of $770 million in 1993, after interest expenses of $320 million. (The corporate tax rate was 36%.) It reported depreciation of $960 million in that year, and capital spending was $1.2 billion. The firm also had $4 billion in debt outstanding on the books, rated AA (carrying a yield to maturity of 8%), trading at par (up from $3.8 billion at the end of 1992). The beta of the stock is 1.05 and the risk premium for equity is 5.5%. There were 200 million shares outstanding (trading at $60 per share), with a book value of $5 billion. Union Pacific paid 40% of its earnings as dividends and working capital requirements are negligible. (The treasury bond rate is 7%.)
Estimate the value of equity at the end of 1993, and the value per share by assuming that Union has constant growth rate and its reinvestment rate is expected to be 60%.
Felicia & Fred’s Firm have now considered furthering their plans for expansion of manufacturing facilities. Their first option is by customizing and refurbishing the large former mill building located in New England near the main production facility...
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,670,000. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,340,000 in..
What is the total return to an investor who buys a bond for $1,100 when the bond has a 9% coupon rate and five years remaining until maturity and then sells the bond after one year for $1,085? What rate of return should an investor expect for a stock..
If Harpo is able to raise the $300,000 it needs by stretching its accounts payable, determine the annual financing cost of this source of financing. For this problem, assume that a year con- sists of twelve 30-day months.
Your firm needs a machine which costs $270,000, and requires $42,000 in maintenance for each year of its 7 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 7-year class life category. Assume a tax rate of 40% ..
Bobaflex Corporation has ending inventory of $698,973 and cost of goods sold for the year just ended was $4,054,513. 1. What is the inventory turnover? 2. What is the days' sales in inventory? 3. How long on average (days on the shelf) did a unit of ..
The treasurer for the Macon Blue Sox baseball team is seeking a $24,200 loan for one year from the 4th National Bank of Macon. The stated interest rate is 20 percent, and there is a 19 percent compensating balance requirement.
Explain the cash conversion cycle (CCC) and net working capital. Why is this important to the contemporary executive? How do executive decisions regarding CCC and net working capital affect the company?
Work out the present value of your tuition payments for the next 2 years. - You can borrow capital at an interest rate of 6% per annum.
Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 24% for two years and then at 5% thereafter. If the required return for Deployment Specialists is 9.5%, what is the intrinsic value of Deployment Specialists sto..
McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $847,500, and $1,200,000 over the next three years. What is the payback period ..
Explain the nature of groups and group behavior within organisations you identified and discuss factors that may promote or inhibit the development of effective teamwork in organisations you identified.
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