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1.We typically claim that stock prices are equal to the present value of their payoffs. What dynamics in the real world cause this to happen?A. Market-makers are obligated to post prices equal to present values.B. Arbitrage in financial markets.C. Government regulations force prices to be equal to present values.D. None of the above statements are correct.2.Consider a bond with face value of $2,000 which pays a 4% annual coupon (this is the interest payment). The bond matures in 12 years. The current yield on bonds with similar characteristics is 3%. Assume that the first interest payment is one year from now - calculate the current price of the bond.3.The market expects the dividends paid by Company X to grow at a constant rate equal to g. The current ex-dividend price of the stock is $40. The value of the first dividend to be paid next period is $1.20 and the discount rate is 5%. What is the growth rate, g, of the stock?4.Consider a case of perfect capital markets without frictions or taxes. In addition, suppose that proficient arbitrageurs are active in this market, so that all arbitrage opportunities have been taken away. Company Y's stock currently trades at $12 per share. Tomorrow, it will pay a dividend of $3. What is the ex-dividend price of the stock?5.Calculate the market capitalization rate for a firm that has no growth opportunities and pays all earnings out in the form of dividend payments. Analysts expect the firm's earnings to stay constant going forward, at $5 per share. The current stock price of the firm is $60.6.Analysts expect Company Z's dividends to grow at a constant rate of 5% per year. The firm is just about to pay a dividend amount equal to $10. Let the discount rate be 8% per year. What is the current stock price?7.The Giraffe Corporation pays dividends on an annual frequency. One year from now the firm will pay its next dividend, which market analysts expect to be $10. The analysts expect that the dividend will grow at g1 = 20% for 3 years, after which it will grow at g2 = 3% in perpetuity. The market capitalization rate for the firm is 6% - what is the current stock price?
How do you execute the time value of money concept to make decisions in your personal life?
New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock?
After 11 years, the mine will be abandoned. Abandonment costs will be $114,000 at the end of year 11.
The remaining $1,500 will be paid in three annual payments of $500 each, starting one year after the drawing. How much would this prize be worth to you if you can earn 9 percent on your money?
The building cost is estimated at $1.47 million. What amount should be used as the initial cash flow for this project?
The project will require $3,000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 34 percent?
Your firm has just issued a 10-year $1,000.00 par value, 10% annual coupon bond for a net price of $964.00. What is the yield to maturity?
Tangshan Mining has common stock at par of $200,000, paid in capital in excess of par of $400,000, and retained earnings of $280,000.
What type of capital structure should the firm choose and why? Please comprise capital structure fallacies and their effects on a firm's decision.
determine several resources available from the small business administration sba for entrepreneurs that might be useful
There are 25 years to maturity. Compute the price of the bonds based on semiannual analysis. With 20 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds?
Name two financing options that are available to corporations. What are the benefits and disadvantages of each? Credit Scoring . Discuss the problems with developing a numerical credit scoring system for evaluating personal loans. You can only test ..
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