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A company is expected to pay a dividend of $1.24 per share one year from now and $1.75 in two years. You estimate the risk-free rate to be 4.1% per year and the expected market risk premium to be 5.3% per year. In two years, you expect the leading PE ratio to be 13. You also expect the earnings to be $4.07 in year 2 and $5.19 in year 3. The beta of the stock is 1.1. What would be an appropriate estimate of the stock price today?
ACME is a very cyclical type of business which is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was paid last year. Five years from now, the company is repurchasing all of the outstanding..
Modern Artifacts can produce keepsakes that will be sold for $40 each. No depreciation fixed costs are $600 per year, and variable costs are $20 per unit. What is the degree of operating leverage of Modern Artifacts when sales are $1,800? What is the..
Assume that you bought a newly-issued Zero coupon bond and a newly-issued coupon bond with a 5.5% coupon on October 10, 2010 when both bonds had a yield-to-maturity of 5.5%. The par value of each bond is $1000. What was the price of each bond when yo..
what is the ending balance of Class A securities after the year 1 payments? (State your answer as a positive number, rounded to the nearest cent.) A CMO is being issued with 3 tranches. The A tranche will consist of $20M of principal and have a coupo..
What is the present value of the following annuity? $2,668 every quarter year at the end of the quarter for the next 7 years, discounted back to the present at 9.33 percent per year, compounded quarterly?
Describe some of the short-term investment vehicles that you use to manage your cash resources. Why did you elect these vehicles over the alternatives? What are their primary advantages and disadvantages?
Conversion price $52/share Coupon rate 6.5% Par value $1,000 Yield on nonconvertible debentures of same quality 8.5% Maturity 25 years Market price of stock $42 /share 23. If the price of the convertible bond is $900, what is the value of the call op..
Thomas invests $121 in an account that pays 6 percent simple interest. How much money will Thomas have at the end of 4 years? Beatrice invests $1,430 in an account that pays 5 percent simple interest. How much more could she have earned over a 6-year..
The city of Detroit is deciding whether or not to build an aquarium. Officials believe that a world-class stingray exhibit will attract families from across Michigan to visit the city. In turn, this will spur local businesses, lead to economic growth..
The store has a beta of 0.8. The yield for a 10-year T-bond is 6%. The required return of the overall stock market is 10%. What is the estimated cost of common equity. (Use the CAPM model).
The real rate of return is 3 percent. If inflation is expected to be 4 percent, what should be the risk free rate of return? What is the risk free rate of return if inflation is 2 percent? If the T-bill rate is 3 percent and inflation is 4 percent, w..
You are 29 years old and decide to start saving for your retirement. You plan to save $5,000 at the end of each year (so the first deposit will be one year from now), and will make the last deposit when you retire at age 70. Suppose you earn 6% per y..
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