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Cost of Equity The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 4% per year in the future. Shelby's common stock sells for $23.00 per share, its last dividend was $2.50, and the company will pay a dividend of $2.60 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 1.7, the risk-free rate is 3%, 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 10%, 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. %
Value the business from the potential buyer's (Great Wall) viewpoint, considering the changes that it will make, explaining fully.
Suppose that banks increase their demand for reserves. Show how the Fed can offset this change through open market operations in order to keep the equilibrium federal funds rate unchanged.
The LIBOR zero curve is flat at 4% (continuously compounded) out to 2 years. Swap rates for 3- and 4-year annual pay swaps are 4.5% and 5%, respectively. Estimate the LIBOR zero rates for maturities of 3 and 4 years. Give your answers as annual rates..
Stock A has a beta of .2, and investors expect it to return 4%. Stock B has a beta of 1.8, and investors expect it to return 8%. Use the CAPM to find the expected rate of return and the market risk premium on the market. Expected rate of return, Mark..
Based on the Ratio sheet as attached on the excel, please write analysis for the below ration *Total assest turnover only * ALL Profitability ratio *Market Value Measures (PE and market to book value ratio) *DUpont analysis.
Uncertainty Surrounding the Country Risk Assessment. Describe the possible errors involved in assessing country risk. In other words, explain why country risk analysis is not always accurate.
Nguyen, Inc., is considering the purchase of a new computer system (ICX) for $130,000. The system will require an additional $30,000 for installation. If the new computer system is purchased, it will replace an old system that has been fully deprecia..
Discuss the sources of the companys competitive advantage - Is the company likely to maintain these competitive advantages over time? What is it or can it do to stay competitive?
Cyberco Corporation has 5 million shares of stock outstanding. Cyberco's after-tax profits are $15 million and the corporation's stock is selling at a price-earnings multiple of 10, for a stock price of $30 per share. Use the price earnings multiple ..
Consider a firm that this year generated free cash flow of $150million. The firm's cash flows grow by 8% annually until t=5, after t=5, the growth rate is considered to slow down to 2% annually. The WACC (discount rate) is 10%. Value the firm in this..
The Cowboys Christmas Company uses a required return of 11.3% to evaluate most projects of average risk. Suppose the company is looking at a new project that is lower-than-average-risk, and the CEO thinks the discount rate should be risk-adjusted. Wh..
You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 10.6 percent. Assume D has an expected return of 14.1 percent, F has an..
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