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The environmental protection agency of a county would like to preserve a piece of land as a wilderness area. The current owner has offered to lease the land to the county for 20 years in return for a lump sum payment of $1.1 million, which would be paid at the beginning of the 20-year period. The agency has estimated that the land would generate $110,000 per year in benefits to hunters, bird watchers, and hikers. Assume that the lease price represents the social opportunity cost of the land and that the appropriate real discount rate is 4 percent.
a) Assuming that the yearly benefits, which are measured in real dollars, accrue at the end of each of the 20 years, calculate the net present value of leasing the land.
Can solve discounted value of all benefits using Excel's PV formula (only works when PMT is constant value over time):
b) Some analysts in the agency argue that the annual real benefits are likely to grow at a rate of 2 percent per year due to increasing population and county income. Recalculate the netpresent value assuming that they are correct.
The stock is currently selling at $47.71, and the required rate of return is 17.0 percent. Compute the dividend for the current year (D0).
For each of the following expiration date values for the unhedged equity position, calculate the terminal values (net of initial expense) for a protective put strategy. 35, 40, 45, 50, 55, 60, 65, 70, 75
The Conely Company is about to go public. It currently has after tax earnings of $7,500,000, and 2,500,000 shares are owned through the present stockholders.
If the riskless rate is 3% and the market return is 8%, estimate Firm A's cost of equity for the new business using the CAPM.
Determine the maturity risk premium on thirty year Treasury bonds? Assume the expected inflation for 3-month T-Bills and 30-year T-Bonds is the same.
How does the use of dual distribution channels and multichannel systems affect the growth of a business? Please list references used.
Are bank mergers and acquisitions good for the economy? How about the shareholder? What impact will it have on the customer? Do customers gain value, perhaps through economies of scale? Is bigger necessarily better?
Describe how management today has changed from the past, with respect to corporate responsibility and ethics.
Thirsty Cactus Corp. just paid a dividend of $1.45 per share. The dividends are expected to grow at 30 percent for the next 10 years and then level off to a 6 percent growth rate indefinitely.
The relevant tax rate is 30 percent. What is the after tax cash flow from the sale of this asset?
The bond issue has a face value of $550,000 and a market quote of 101.2. The company's tax rate is 37 percent. What is the firm's weighted average cost of capital?
Dividend changes may be used by management as a credible communication tool to signal investors about future earnings under which of the following dividend policy theories?
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