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Sisters Corp expects to earn $5 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%.
a. Calculate the price with the constant dividend growth model.
Price =
b. Calculate the price with no growth
c. What is the present value of its growth opportunities
PVGO =
Martha's Interiors has a current beta of 1.2. The market risk premium is 6 percent and the risk-free rate of return is 4 percent. By how much will the cost of equity increase if the company completes an acquisition such that their company beta rises ..
Construct the pro forma and compute expected project cash flows. - Compute the project IRR. - Compute the project NPV.
Based on our past experience, the unit sales, variable costs and fixed cost projections are probably accurate to within plus or minus 10% What is the cash break-even level of output for this project (ignoring taxes)? What is the accounting break-even..
A stock’s price is $38 and the price of a 3-month call option on the stock with a strike price of $38 is $3.80. Suppose a trader has $3,800 to invest and is trying to choose between buying 1,000 options and 100 shares of stock. How high does the stoc..
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,030,000 and will be sold for $1,230,000 at the end of the project. If the tax rate is 34 percent, what is the after tax ..
A company’s normal selling price for its product is $29 per unit. However, due to market competition, the selling price has fallen to $24 per unit. This company's current inventory consists of 290 units purchased at $25 per unit. Replacement cost has..
You are the financial analyst for the Glad It’s Finally Over Company. The director of capital budgeting has asked you to analyze a proposed capital investment. The project has a cost of $20,000, and the cost of capital is 10 percent. What is the proj..
Consider the demand for electricity of a manufacturing sector in the United States. -Build a time series model for the series and use the fitted model to produce 1-step to 24-step ahead forecasts.
Travis is offered the following income stream of payments: $10,000 in one year, $20,000 in two years, and 50,000 in five years. How much should Travis be willing to pay for this income stream if his opportunity cost of capital is 6.5%?
Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an iPad for $350. The minimum payment on the card is only $10 per month. How much interest in total does he pay on his credit card debt?
Write down the relationship between nominal rates of return (rnominal), real rates of return (rreal), and the inflation rate (π).
Atlantis Fisheries issues zero coupon bonds on the market at a price of $468 per bond. These are callable in 5 years at a call price of $570. Using semiannual compounding, what is the yield to call for these bonds?
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