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Beasley Ball Bearings paid a dividend of $4 last year. The dividend is expected to grow at a constant rate of 3 percent over the next five years. The required rate of return is 11 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the anticipated value of the dividends for the next four years. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Anticipated Value D1 $ D2 $ D3 $ D4 $ b. Calculate the present value of each of the anticipated dividends at a discount rate of 11 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) PV of Dividends D1 $ D2 D3 D4 Total $ c. Compute the price of the stock at the end of the fourth year (P4). (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price at Year 4 $ d. Calculate the present value of the year 4 stock price at a discount rate of 11 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value of Year 4 stock price $ e. Compute the current value of the stock. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Current value $ f. Use the formula given below to show that it will provide approximately the same answer as part e. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) P0 = D1 Ke − g Current value $ g. If current EPS were equal to $5.15 and the P/E ratio is 1.2 times higher than the industry average of 9, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price $ h. By what dollar amount is the stock price in part g different from the stock price in part f? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Amount $ i. In regard to the stock price in part f, indicate which direction it would move if: (1) D1 increases (2) Ke increases (3) g increases
A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 years. The attorney for the plaintiff’s estate argues that the lost income should be discounted back to the present at..
A firm’s dividends have grown over the last several years. 10 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $7. What was the average annual growth rate of dividends for this firm? Round answer to two decimal places.
A credit card is offered with monthly payments and a 21.99% APR. What is the loan's effective annual rate (EAR)? EAR: Calculate the price of a $1,000 bond, offering a 10% coupon payment with 20 years left to maturity and a market interest rate of 12%..
Levin Furniture buys a living room set with a $4,700 list price and a 50% trade discount. Freight (FOB shipping point) of $45 is not part of the list price. What is the delivered price (including freight) of the living room set, assuming a cash disco..
Shanken Corp. issued a bond with a maturity of 20 years and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? What is t..
Yield to Maturity and Call with Semiannual Payments Thatcher Corporation's bonds will mature in 11 years. The bonds have a face value of $1,000 and an 9% coupon rate, paid semiannually. The price of the bonds is $1,050. The bonds are callable in 5 ye..
Working Capital Simulation: Managing Growth Assignment Due Mar 28, 11:59 PM Not Submitted POINTS 8 Paper no new messages Objectives: 6.1 5.3 3.2 more Instructions Assignment Files Grading Resources: Harvard Business Publishing: Working Capital Simula..
Beginning 3 months from now, you want to be able to withdraw $2,000/quarter from your bank account to cover college expenses over the next four years. The account pays .75% per quarter. How much do you need to have in your account today to meet your ..
A proposed investment must earn at least as much as the ______ if it is to be deemed acceptable. Betas are exact measurements. If a stock has a very low beta, it is most apt to maintain that beta in the future. The expected future risk premium is eas..
Fuller Preferred has a nominal rate of 3% with a par value of $3.75. You just bought 3 round lots at a quote of 12.65. What is the dividend check you will get the next time a dividend is paid?
Financing infrastructure projects entails a formidable set of risks. It is the role of the project finance advisor, the project sponsor and other participants to structure the financing in such a manner as to mitigate these risks. The project finance..
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 18 million. The cash flows from the project would be sf 5.5 million per year for the next five years. Use the approximate ..
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