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Say you decide to start a firm and you need $500 million of capital to begin. You sell stock for its par value, a total of one million shares (par value is $200 per share), and sell $300 million of bonds at par value. You use the capital you just raised to buy $500 million of equipment. Assume that the average cost of capital = 12%. In the first year of operation, EBIT = $105 million, tax rate 40% and the required rate of return on equity is 22%. Assume that the market expects that the firm will continue to grow its Economic Profit at a rate of 6% annually, what is the market price per share of stock?
Garner-Wagner has a project that produces the following cash flows: CF0 = −3,000,000; CF1−5 = 500,000; and has a discount rate of I/YR = 10. CF0 = −3,000,000; CF1−5 = 500,000;
ABC Company sells 2,995 chairs a year at an average price per chair of $198. The carrying cost per unit is $27.77. The company orders 330 chairs at a time and has a fixed orde
Johnson Products earned $3.05 per share last year and paid a $1.50 per share dividend. If ROE was 13 percent, what is the sustainable growth rate? (Do not round intermediate c
Discuss why do some people protest against globalization? What point do they make that all people, whether for or against globalization, should consider? How does political ri
Union Local School District has bonds outstanding with a coupon rate of 3.2 percent paid semiannually and 21 years to maturity. The yield to maturity on these bonds is 3.5 per
Risk and Return. A stock will provide a rate of return of either −18% or +26%. If both possibilities are equally likely, calculate the stock's expected return and standard dev
TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $2,700,000 and there are 275,000 shares outstanding. If the benchmark price-sale
On January 5, 2015, Allan purchases 500 shares of Wichmann, Inc., common stock at a cost of $23,400. On April 1, 2015, he purchases an additional 300 shares for $19,890. On No
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