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Dexter Corp. will pay a dividend of $1.44 next year. The company has stated that it will maintain a constant growth rate of 5.4% a year, forever. A. If you want a return of 13%, how much should you pay for the stock? B. What is the expected capital gain yield for this stock? C. What is the dividend for year 7? D. What is the price of the stock at t=6 Please show calculations and equations.
Your portfolio is diversified. It has an expected return of 11.0% and a beta of 1.10. You want to add 300 shares of Kraft Foods Inc at $40 a share to your portfolio. Calculate the expected beta on the portfolio after you have added Kraft Foods Inc's ..
Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.01, while in the 180-day forward market 1 Japanese yen = $0.0108. 180-day risk-free securities yield 1.1% in Japan. What is the yield on 180-day risk-free securities in th..
What is the relationship between the value of a firm and its capital structure, given the existence of a corporate income tax, bankruptcy costs, and agency costs?
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.9, 1.3, 1.4, and 1.5, respectively. What will the WACCs be for each div..
An investment company. Will speculate on the pound with a forward contract. The investment company expects the pound to depreciate from today’s spot rate of $1.95 to a spot rate of $1.85 in 90 days. The 90 day forward rate is $1.65. To make a profit,..
Compute the current market value of a bond with a $784 face value, maturing in 9 years, an interest rate of 10%, and annual payments of $64. Compute the present value of an ordinary annuity receiving 7 annual payments of $29 at an interest rate of: 2..
Why is any NPV for a project that is greater than zero good? What is the main benefit of using a weighted scoring model? Identify and discuss what the first step of project portfolio management is and what value it brings to managing projects as a po..
Ashes Divide Corporation has bonds on the market with 17 years to maturity, a YTM of 10.0 percent, and a current price of $1,216.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Pick any constraint from any problem in the text, and explain how to plot the line that corresponds to that constraint.
A stock you are buying today promises no dividends for a long time. In exactly 5 years the stock will pay its first dividend of $2.30. At that time you also believe the stock could be sold for $43.00. If today you can buy the stock for $28.95, what i..
What is insolvency risk? How can liquidity risk and credit risk cause insolvency? What actions can a financial institution take to best protect itself against insolvency?
Explain the difference between observed market prices and intrinsic (unobservable) prices. Explain what makes a market “fair” Define operational efficiency. Define informational efficiency (speed of info, accuracy of info, and accuracy of response to..
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