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Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A B Required return 10% 12%
Market price $25 $40
Expected growth 7% 9%
a.These two stocks should have the same expected return.
b.These two stocks should have the same price.
c.These two stocks must have the same expected capital gains yield.
d.These two stocks must have the same dividend yield.
You've just opened a margin account with $10,000 at your local brokerage firm. You instruct your broker to purchase 450 shares of Smolira Golf stock, which currently sells for $40 per share. Suppose the annual call money rate is 6 percent and your br..
Suppose Tom, Ltd. just issued a dividend of $2.00 per share on its common stock. The company’s dividends have been growing at a rate of 7%. If the stock currently sells for $50.00, what is your best estimate of the company’s cost of equity?
The net effect of a stock repurchase is ________.
Assume that the risk-free rate is 6% and that the market risk premium is 8%. What is the required rate of return on a stock with a beta of 1.3?
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Why do companies have the conversion condition? What are the pros and what the cons? Identify which pro you consider to be most advantageous and which con you think is the most detrimental or negative. Explain
Again assume today is Jan 1, 2011. A different bond is priced with a yield to maturity of 6%. The face value is $1,000, the coupon rate is 5% paid on an annual basis, and it matures in 3 years. Calculate the current price of the bond. What is the cur..
Suppose that today's stock price is $33.9. If the required rate on equity is 19.8% and the growth rate is 3.2%, compute the expected dividend (i.e. compute D1)
The firm is considering the purchase of a new machine. The machine costs $31,500 and will produce an after-tax cash flow of $5481 per year at the end of each of the next 9 years. The disposal of equipment will generate an additional cashflow after ta..
Commercial paper is:
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