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Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $750,000. Without new projects, both firms will continue to generate earnings of $750,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 14 percent rate of return. Required: (a) What is the current PE ratio for each company? Pacific Energy Company: U.S. Bluechips, Inc.,: (b) Pacific Energy Company has a new project that will generate additional earnings of $100,000 each year in perpetuity. Calculate the new PE ratio of the company. PE ratio times (c) U.S. Bluechips has a new project that will increase earnings by $200,000 in perpetuity. Calculate the new PE ratio of the firm. PE ratio times.
A large Bank Holding Corporation has Tier-1 capital of $40 billion and Tier two capital of $20 billion and risk weighted assets of $550 billion.
Jacob has an opportunity to invest in new retail development in his building. The initial investment is $50,000 & expected cash-flows are as follows: Year 1: $2,500 Year 2:
The Home Appliance Industry had free cash flow to equity of $87 for the year ending December 31, 2007. The industry anticipates a increase rate of 8 percent for the next three years due to favorable economic conditions.
Describe the difference between a short term, medium term and a long term loan. Use the following situations to describe the relative size of the interest rates charged on the following types of loans:
Rochester, Inc. has 7,500 shares of stock outstanding at a market price of $42 each and earnings per share of $1.90. The firm has decided to repurchase $63,000 worth of stock. What will the PE ratio be after the repurchase, all else held constant?
Computation of shares of common stock and cash dividends and what new cash dividend per share amount will result in the same total dividend income as you received before the stock split
Historically high return stocks have exhibited lower risk than low return stocks - while the smart money knows this and is able to effectively arbitrage excess returns from low risk stocks? To what extent does this make sense? Discuss and elaborate..
Friendly's Quick Loans, Inc., offers you $8.25 today but you must repay $10.45 when you get your paycheck in one week (or else).
Rockinghouse Corp. plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $402.35. Assuming annual coupon payments, what is the yield to maturity on these bonds?
Stock A has expected return of 12 percent and standard deviation of 40 percent. Stock B has an expected return of 18% and standard deviation of 60%. The correlation coeffecient between stocks A and B is 0.2.
The initial proceeds per bond, the size of the issue, the initial maturity of bond, and the years remaining to maturity are shown in the following table for number of bonds.
Calculate the required rate of return, in percentages, for the Wagner Assets Management Group, which holds 4 stocks.
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