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Nonconstant growth
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 47% per year - during Years 4 and 5; but after Year 5, growth should be a constant 4% per year. If the required return on Microtech is 16%, what is the value of the stock today? Round your answer to the nearest cent.
Why cannot the president of a firm cause the firms market value to increase simply by reporting anticipated favorable changes in the six variables, e.g., an increase in expected return on investment?
A company pays a $0.50 dividend. The dividend is expected to grow at a 20% rate for the next two years. Thereafter, over the subsequent three years, its growth should decline linearly, ultimately reaching a stable, mature growth rate of 5% per year. ..
NPV and IRR A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain, and the next payment is due in 1 month. Should the new lease be accepted? The store owner is not sure of the 12% WACC — it could be higher..
You need a 25-year, fixed-rate mortgage to buy a new home for $255,000. Your mortgage bank will lend you the money at a 5.50 percent APR for this 300-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remai..
The efficient set of portfolios
The implementation of a pro-active ethics program is expected to result in
A company's 8% coupon rate, semi-annual payment, $1,000 par value bond that matures in 25 years sells at a price of $619.33. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calcula..
Assume that you manage the interest rate risk position for your bank. Your bank currently has a positive cumulative GAP for all time intervals through one year. You expect that interest rates will fall sharply during the year and want to reduce your ..
Athlete Kalen wishes to retire at age forty-five and receive annual birthday payments of $40,000 beginning on his forty-fifth birthday. After his death, the payments on the anniversary of his birth should go to his heirs.
Billy Bobs, Inc has a $1000 par value bond that is currently selling for $911.It has an annual coupon rate of 11.70%, paid semi-annually, and has 28-years remaining until maturity What would the annual yield to maturity be on the bond if you purchase..
Calculate the wacc for PG given the following: the company has outstanding debt that matures in 20 years that has a coupon of 9%. It pays interest semi-annually and the bon% premium to par is 1214.59. For a reference 20 year treasuries are yielding 3..
With free trade, why would production occur only in one country? - Does opening trade bring gains to both countries? Explain.
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