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a. XYZ Corporation has 1 million shares of stock outstanding and has annual income of $8 million. The company has no expansion opportunities and depreciation equals the replacement cost necessary to maintain operations. Therefore income is available to distribute as dividends and is expected to continue indefinitely. The cost of capital is 14%. What is the current value per share of XYZ Corporation stock?
b. A new opportunity arises for XYZ. The investment will cost $1 million three (3) years from now (t = 3) and will generate income available for dividends of $500,000 in year 4, $600,000 in year 5 and $700,000 in year 6. What is the value today per share of that future investment opportunity?
ABC Company writes 269 checks a day for an average amount of $385 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $128,596 a day in checks that are deposited immediately. Deposited funds a..
The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has a cost of $145,000. The project will produce 750 cases of mineral water per year indefinitely. Assume that cash flows consist only of after-tax..
In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1...
You own a bond with a 5.6 percent coupon rate and a yield to call of 6.5 percent. The bond currently sells for $1,096. If the bond is callable in five years, what is the call premium of the bond?
Financial Update as of June 15. you don’t need to spend any money for new equipment in your exisiting cafes; however, you do need $22,050 of additional cash -you also need to purchase $11,760 in additional supplies- such as cloth tablecloths and napk..
There are two basic types of cost-plus-fixed-fee contracts. ______ describes the scope of work to be done in general terms and which obligates the contractor to devote a specified level of effort for a stated period of time for the conduct of researc..
You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 12.3 percent. Assume D has an expected return of 15.8 percent, F has an..
You rent an apartment for $600 per month, payable at the beginning of the month. An initial deposit of $480 is required. Utilities are an additional $140 per month payable at the end of the month. The cash flow diagram can be first represented by end..
research a company of your choice and locate the latest financial statements published by the company.for the following
When forecasting balance sheet financials, an unusually high projected short-term investment balance suggests which of the following?
Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $220,000, a 3-year expected life, and after-tax cash flows (labor savings and depre..
Tom and Sue’s Flowers, Inc.’s, 15-year bonds are currently yielding a return of 9.05 percent. The expected inflation premium is 3.05 percent annually and the real risk-free rate is expected to be 3.20 percent annually over the next 15 years. Calculat..
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