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The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $22.75 per share, its last dividend was $2.00, and the company will pay a dividend of $2.10 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 1.3, the risk-free rate is 4%, and the expected return on the market is 14%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 11%, and analysts estimate the market risk premium is 3 to 5 percent, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range). % On the basis of the results of parts a through c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. %
If a nation's income exceeds its spending, then. The US savings deficit can be attributed, in part, to. In a freely floating exchange rate system, if the capital account surplus for the U.S. rises, what will most likely happen to the real value of th..
Under current US law, employer-provided health care benefits are excluded from taxation. Use an indifference curve analysis to model the impact of eliminating the exclusion upon the amount of health care benefits. (Hint: Think of an individual as con..
You are building a pipeline which will generate its first annual cash flow of $2m exactly 5 years from today. As it ages, the volume it transports, and hence the cash flows it creates, will decline by 3% per year. Exactly 27 years from today, this pi..
We have futures contracts on Treasury bonds, but we do not have futures contracts on individual corporate bonds. We have cattle and hog futures but no chicken futures. Explain why the market has developed in this manner. What do you think are the mos..
Cost of Trade Credit What is the nominal and effective cost of trade credit under the credit terms of 1/15, net 30?
Which of the following can be best described as the opposite of stock dividends, i.e., a reverse stock split?
An investor is considering purchasing a bond with a 9.22 percent coupon interest? rate, a par value of ?$1 comma 000 ?, and a market price of ?$1 comma 247.36 . The bond will mature in nine years. Based on this? information, answer the following? que..
Buying Stock with a Market Order You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.35 and $96.60, respectively. You place a market buy-order for 400 shares that executes at these quoted pric..
Discuss systematic and unsystematic risk, which can be diversified and why? Also discuss some measures of systematic risk and how they can be used to maximize returns and minimize risk.
Assume that the average firm in your company's industry is expected to grow at a constant rate of 7% and that its dividend yield is 5%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
Cartwright Communications is considering making a change to its capital structure to reduce its cost of capital and increase firm value. Right now, Cartwright has no debt in its but plans to borrow $6 million with interest rate of 8%. What is EPS for..
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.90 million for land and $9.10 million for trucks ..
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