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The risk-free rate of return is 6.5%, the expected rate of return on the market portfolio is 13%, and the stock of Xyrong Corporation has a beta coefficient of 2.7. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 25% per year on all reinvested earnings forever.
a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic value $ _______________
b-1. If the market price of a share is currently $96, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ __________
b-2. What is your expected one-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected one-year holding-period return _________ %
(Net present value calculation) Big Steve’s, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $100,000 and will generate net cash inflows of $18,000 per year for 10..
Plan B requires quarterly payments of $11,000 for the first year, $7,000 for the second and third year, and $3,000 for the fourth year. Compute the APR and EAR of both loans. Which loan should you take and why?
Should insiders (example company owners) of a company be allowed to purchase stock at a lower price that the market price offered? Should the public be made aware that insiders are paying a lower price? How?
Medwig Corporation has a DSO of 42 days. The company averages $4,500 in credit sales each day. What is the company's average accounts receivable? Round your answer to the nearest dollar.
A "three against nine" FRA has an agreement rate of 5.25%. You believe that six-month LIBOR will be 5.6% in three months. You decided to speculate using a FRA with a $5,000,000 notional amount. Determine whether you should buy or sell the FRA and als..
Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 13.04 percent coupon rate and paid interest annually. It is now 19 years later. The current market rate of interest on the Bright Sun bonds is 11.22 perce..
An investment project has annual cash inflows of $5,000, $5,500, $6,000, and $7,000, and a discount rate of 14 percent. What is the discounted payback period for these cash flows if the initial cost is $8,000?
Cochrane, INC., is considering a new three-year expansion project that requires an intial fixed asset investment of 2,340,00. The fixed asset falls into the three-year MACRS class. The project is estimated to generate 2,230,000 in annual sales, with ..
Tar Heel Healthcare has no debt financing and has a firm value of $20 million. It has a corporate tax rate of 34 percent. The firm's investors are estimated to have marginal tax rates of 31 percent on interest income and 28 percent on stock income. A..
Develop the Executive Summary and Section 5, 'Summary, Recommendations and Conclusion', which includes your formal recommendation to the company.
after deciding to buy a new car you can either lease the car or purchase it with three-year loan. the car you wish to
What alternatives are available to the failing firm? Basically, what determines whether a bankrupt company is reorganized or liquidated?
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