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The firm you are CEO if has a current period cash flow of 2.1 million and pays no dividend. The present value of the company’s future cash flows is $17.5 million. The company is entirely financed with equity and there are 500,000 shares outstanding. Assume the dividend tax rate is zero. What is the share price of your firm? Suppose you and the board announce a plan to pay out 50 percent of the current cash flows as a dividend to its shareholders. How can a shareholder, who owns 1000 shares, achieve a zero pay-out policy on their own? Please show your work.
A) Share price = $39.20, purchase 56.60 shares
B) Share price = $35.00, purchase 63.83 shares
C) Share price = $39.20, purchase 53.57 shares
Banks and other depository institutions make loans, invest in government securities, buy and sell federal funds, and accept deposits with a wide spectrum of maturities and with many payable on demand. Briefly discuss the risks facing these institutio..
Because the WACC incorporates the tax savings from debt, we can compute the levered value of an investment, which is its value including the benefit of interest tax shields given the firm's leverage policy, by discounting its future free cash flow us..
You find a zero coupon bond with a par value of $10,000 and 19 years to maturity. The yield to maturity on this bond is 4.1 percent. Assume semi annual compounding periods. What is the price of the bond?
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Nations Bank offers to lend you $50,000 at a nominal rate of 5.0%, simple interest, with interest paid quarterly. Bank of US offers to lend you the $50,000, but it will charge 5.5%, simple interest, with interest paid at the end of the year. What's t..
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The main advantage of deterministic models is that they
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in the hope of high returns venture capitalists provide funds to finance new start up companies. however potential
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