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LSI recently issued $195,000 of perpetual 9% debt and used the cash to do a stock repurchase. Earnings for LSI are anticipated to be $83,000 annually before interest and taxes. The company has a dividend payout of 100% of earnings and its unlevered cost of capital is 15%. Corporate taxes for LSI are 40%.
a) What is the unlevered value of LSI??b) What is the value of the levered firm using the adjusted PV method?c) What are an investor's expectations for the return on equity for the levered company?d) What is the value of LSI equity using the flow to equity method?
If the stock market is semi-strong efficient, which of the given statements is correct? All stocks should have the same expected returns; however, they may have different realized returns.
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Company purchase a window franchise from on January 2, 2010 for $100,000. A research company estimated that the remaining useful life of the franchise was fifty years.
Company planning of project up front paid today at t = o .The project will generate positive cash flow of $60,000 for the next 5years.The project NPV is $75,000 and company WACC is 10 percent.
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Assume that the stock of the new cologne manufacturer, Eau de Rodman, Inc., has been forecast to have a return with standard deviation .30 and a correlation with the market portfolio of .9.
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Suppose the following data for the BU Scholarship Investment Fund. The total investment in the fund is $1 million.
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