Two corporations a and b have exactly the same risk

Assignment Help Finance Basics
Reference no: EM13844220

Two corporations A and B have exactly the same risk, and both have a current stock price of $100. Corporation A pays no dividend and will have a price of $120 one year from now. Corporation B pays dividends and will have a price of $113 one year from now after paying the dividend. The corporations pay no taxes and investors pay no taxes on capital gains, but pay a 30% income on dividends. What is the value of the dividend that investors expect corporation B to pay one year from today?   Please show all work and be very descriptive. 

 

 

Reference no: EM13844220

Questions Cloud

What is the after-tax cost for the bonds : Builtrite Furniture is considering sells bonds for a plant expansion. Currently, Builtrite believes that it could sell 15 year maturity, $1000 par value, 5 3/4% coupon bonds after flotation costs for $985.  If Builtrite is in the 34% marginal tax bra..
Explicit trade-off analysis in health policy making : What are the primary political obstacles in using explicit trade-off analysis in health policy making?
Production-distribution and transportation : Select a company that has a global supply chain and describe it, including purchasing, production, distribution, and transportation.
Draw associated decision tree-launching the new product : AFC is about to launch its new Wings N Things fast food nationally. The research department is convinced that Wings N Things will be a great success and wants to introduce it immediately in all AFC outlets without advertising. Draw the associated dec..
Two corporations a and b have exactly the same risk : Two corporations A and B have exactly the same risk, and both have a current stock price of $100. Corporation A pays no dividend and will have a price of $120 one year from now. Corporation B pays dividends and will have a price of $113 one year from..
Builtrite auto has preferred stock shares outstanding : Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $8 and are currently selling for $86 a share.  What is the after-tax cost of preferred stock if the flotation cost for new shares is 5% and Builtrite is in the 34% m..
Continuous review model and a periodic review model : Which of the following statements is INCORRECT regarding the differences between a continuous review model and a periodic review model?
What is the black-scholes value of such a call struck : Suppose a stock is trading at $80 and has an annualized volatility of 0.4. Money may be borrowed to any tenor at 4% annualized.(a) What is the Black-Scholes value of such a call struck at 81 maturing in: One hour? Four hours? Two days? A week? A mont..
Satisfied for an occurrence to be an event : Which of the following is NOT a condition that must be satisfied for an occurrence to be an event?

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Efficient form of measuring risk

Write a review of the given article. Explain the key points that the author is trying to communicate. The review should be at least two pages in addition to the title and reference pages.

  How much potential value would the firm lose

You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?

  Explain two way financial systems had an impact in your life

Explain at least two ways financial systems and markets have had an impact in your life in the past or may impact you in the future.

  Compute a fair rate of return for intel common stock

Compute a fair rate of return for Intel common stock, which has a 1.2 beta. The risk-free rate is 6 percent, and the market portfolio (New York Stock Exchange stocks) has an expected return of 16 percent.

  What may limit the use of the network model

Furthermore What may limit the use of the network model in the firm? Do they operate effectively in all situations?

  Answer in dollars and assuming there is sufficient cash

total market value of a company 60million. during the year company plans to invest 30mil in new projects. based on the

  Finance balance sheet explain why the cost of capital for

finance balance sheet explain why the cost of capital for a firm is equal to the expected rate of return to the

  Prepare and explain an sfas matrix and a tows matrix for

prepare and explain an sfas matrix and a tows matrix for your selected company. data presented in tables do not speak

  Aperpetuity-due has annual payments of 10000 11000 12000

a perpetuity-due has annual payments of 10000 11000 12000 ... if the present value of the seventh and eighth payments

  What are the pros and cons of setting a target rating

Some companies' debt-equity targets are expressed not as a debt ratio, but as a target debt rating on a firm's outstanding bonds. What are the pros and cons of setting a target rating, rather than a target ratio? Please explain both and provide ad..

  What is the stock expected capital gains yield

If D1 = $1.50, g (which is constant) = 6.5%, and P0 = $56, what is the stock's expected capital gains yield for the coming year?

  Accounting and time value of money

Computation of Future Values and Present Values by using the appropriate interest table, answer each of the following questions.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd