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1.An investor requires a return of 12 percent. A stock sells for $25, it pays a dividend of $1, and the dividends compound annually at 7 percent. Will this investor find the stock attractive? What is the maximum amount that this investor should pay for the stock?
2.A firm’s stock earns $2 per share, and the firm distributes 40 percent of its earnings as cash dividends. Its dividends grow annually at 7 percent.a)What is the stock’s price if the required return is 10 percent?b)The firm borrows funds and, as a result, its per-share earnings and dividends increase by 20 percent. What happens to the stock’s price if the growth rate and the required return are unaffected? What will the stock’s price be if after using financial leverage and increasing the dividend to $1, the required return rises to 12 percent? What may cause this required return to rise?3.The annual risk-free rate of return is 9 percent and the investor believes that the market will rise annually at 15 percent. If a stock has a beta coefficient of 1.5 and its current dividend is $1, what should be the value of the stock if its earnings and dividends are growing annually at 6 percent?4.You are considering two stocks. Both pay a dividend of $1, but the beta coefficient of A is 1.5 while the beta coefficient of B is 0.7. Your required return is K= 8% + (15% 2 8%)β.a)What is the required return for each stock?b)If A is selling for $10 a share, is it a good buy if you expect earnings and dividends to grow at 5 percent?c)The earnings and dividends of B are expected to grow annually at 10 percent. Would you buy the stock for $30?d)If the earnings and dividends of A were expected to grow annually at 10 percent, would it be a good buy at $30?5.You buy a stock for $20. After a year the price rises to $25 but falls back to $20 at the end of the second year.What was the average percentage return and what was the true annualized return?6.The S&P 500 declined 38.49 percent during 2008, its third-worst performance in history.What percentage increase is necessary to re- coup the 38.49 percent loss?
how large must the lump sum be to leave him as well off financially as with the annuity?
if japan has low inflation and mexico has high inflation, what will happend to the exchange rate between the Japanese Yen and Mexican Peso.
What would be the percentage appreciation on the stock bought by the venture investors versus the investment appreciation for the founders?
Now assume that Bank Z makes a loan in the amount that can be safely lent against the funds deposited in its bank from the transaction described in (b). Show what Bank Z's balance sheet of assets and liabilities would look like after the loan.
At age 25 you spend $2,000 that earns 6 percent each year. At age 35 you invest $2,000 that earns 9 percent per year. In which case would you have more money at age 60?
What would the weights used in the calculations of Accessory WACC for comon stock and preferred stock and bonds, respectively?
Using the profitability index, rank the projects, starting with the most attractive.
From the perspective Chinese government should they accelerate an upward revaluaton of the Yuan (Renminbi)? Yes or no and why.
The machine falls into the MACRS 5-year class life category. Assume a tax rate of 30% and a discount rate of 13%. What is the depreciation tax shield for this project in year 5?
Jailer Shoe Corporation produces shoes that sell for 40 dollars each and have a variable cost of $39.50. Fixed costs are 37,000 dollars. Calculate the break-even points in units.
Compute the NPV for Project X with the cash flows shown below if the appropriate cost of capital is 9 percent. Time: 0 1 2 3 4 5 Cash flow: -80 -80 0 110 85 60
You wish to retire a $10,000,000 bond that can be called in 5 years for 110 percent of par value, or $11,000,000.
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