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You have finally saved $10,000 and are ready to make your first investment. You have the three following alternatives for investing that money:
• Capital Cities ABC, Inc. bonds with a par value of $1,000, that pays an 8.75 percent on its par value in interest, sells for $1,314, and matures in 12 years.• Southwest Bancorp preferred stock paying a dividend of $2.50 and selling for $25.50.• Emerson Electric common stock selling for $36.75, with a par value of $5. The stock recently paid a $1.32 dividend and the firm's earnings per share has increased from $1.49 to $3.06 in the past five years. The firm expects to grow at the same rate for the foreseeable future.Your required rates of return for these investments are 6 percent for the bond, 7 percent for the preferred stock, and 15 percent for the common stock. Using this information, answer the following questions.
a. Calculate the value of each investment based on your required rate of return.b. Which investment would you select? Why?c. Assume Emerson Electric's managers expect an earnings downturn and a resulting decrease in growth of 3 percent. How does this affect your answers to parts a and b?d. What required rates of return would make you indifferent to all three options?
The firm borrowed $100,000 at 11 pecent per year resulting in additional interest of $11,000 per ye
June 1, 2004 Janson Corporation sold $1,000,000 in long term bonds for $877,600 maturing in ten years with a stated interest rate of 8 percent and yield rate of 10 percent.
Using the information below, create a decision tree for John Smith Framing and compute the expected value for each printer. Which printer should the framing store purchase?
Assume interest rate of 8%. A company receives cash flows of $542 at the end of year 5, $275 at the end of year 7, and $691 at the end of year 10. Compute the future value of this cash flow stream.
suppose the yen value of dollar dropped from Y180/$ to Y95/$ What is the percent decrease in the yen value of the dollar?
Relaxation of credit standards Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales.
Your work for this module is to apply the concept of the present value to your chosen SLP company. Assume your company is selling the bond that will pay you $1000 in one year from today.
what are the firm's current capital structure weights for equity and debt respectively?
A stock has a beta of 1.32, the expected return on the market is 10 percent, and the risk-free rate is 3.5 percent. What must the expected return on this stock be?
The Goreman Company has a debt ratio of 33.33%, and it needs to raise $100,000 to expand. Management feels that an optimal debt ratio is 16.67 percent.
Compute Degree of operating leverage and combined leverage & financial leverage and interpreting these values.
How much can a company's short-term debt(notes payable) increase without pushing its current ratio below 2.0? What will be the firm's quick ratio after Nelson has raise the maximum amount of short-term funds?
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