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Gardner Electric has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 12.50%. Using the SML, what is the firm's required rate of return?
Suppose the M1 multiplier is currently 1.95 and the M2 multiplier is currently 8.03. If banks decide to decrease the ratio of required clearing balances they hold relative to the amount of transactions deposits they hold, the M1 multiplier will ____ ..
Operating income (EBIT) $600 million, Debt $0, Interest expense $0, Tax rate 35%, Cost of equity 7%, WACC 7%. The company has no growth opportunities (g = 0), so the company pays out all of its earnings as dividends. If the company makes this change,..
Sports EX Inc. is a Sports Shoes Company which is considering investing in a new equipment for the production of a new line of Tennis and Football Shoes for its elite customers. The new equipment will costs $250,000, and an additional $80,000 is need..
Annuity A makes annual year-end payments of $976.50 for each of the next 10 years, while investment B makes annual year-end payments of $600 per year forever. At what interest rate would you be indifferent between the two investments? At interest rat..
Salmon Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%..
What is the average contribution to net income across all four years?- What is the average book value of the investment?
Mustaine Corporation stock currently sells for $79 per share. The market requires a return of 9.6 percent on the firm’s stock. If the company maintains a constant 2.8 percent growth rate in dividends, what was the most recent dividend per share paid ..
You are bullish on Telecom stock. The current market price is $80 per share, and you have $9,000 of your own to invest. You borrow an additional $9,000 from your broker at an interest rate of 9% per year and invest $18,000 in the stock. a. What will ..
A mutual fund manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $60 million which she plans to invest in additional stocks. After i..
Under these circumstances, would you purchase this stock? What do you believe is a fair market price for the stock?
TAFKAP Industries has 5 million shares of stock outstanding selling at $14 per share, and an issue of $30 million in 7.5 percent annual coupon bonds with a maturity of 15 years, selling at 103 percent of par. Assume TAFKAP’s weighted average tax rate..
The real risk-free rate is 3.15%. Inflation is expected to be 2.6% this year, 4.65% next year, and then 2.15% thereafter. The maturity risk premium is estimated to be 0.05(t - 1)%, where t = number of years to maturity. What is the yield on a 7-year ..
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