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Determining ROE to Yield Projected PB
Google recently had a market cap of $409.98 billion, total equity of $87.31 billion, and 336.05 million shares outstanding. At about the same time, the PB of Yahoo and eBay were 2.97 and 3.08 respectively. Assume that we desire a minimum 12% annual return on our investments, and that we believe Google will sell at 3.0 times book value five years from now. What must Google earn (ROE) on average over the next 5 years to make it a worthwhile investment?
(Assume that Google pays no dividends. Do not round until your final answer. Round your answer to one decimal place.)
The AZ Company currently has $1,000,000 in physical assets that have always generated a steady stream of earnings for the company. The management of the firm has always paid all of its earnings to shareholders as a dividend. What is the required rate..
Suppose an agribusiness in Texas exports its crops. It expects an 18 million peso invoice for an export to Mexico to be paid in 90 days. The current spot and 90-day forward rates are $0.7502/Peso and $0.7422/Peso respectively. Calculate the company’s..
Suppose you deposited the $1,000 in 4 payments of $250 each at the end of Years 1, 2, 3, and 4.
You are interested in an investment project that costs $40,000 initially. The investment has a 5-year horizon and promises future end-of-year cash inflows of $12,000, $12,500, $11,500, $9,000, $8,500 respectively. What is the NPV of the investment un..
how much will the U.S. company receive in terms of U.S. dollar on the delivery date?
Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companies—a gourmet restaurant chain, a baby food company, and a nutritional produ..
Nadine Love invests in a $60,000 annuity at 12% compounded annually starting today. The first of 15 receipts from the annuity is payable to Love 10 years after the annuity is purchased and on the date Love expects to retire. Calculate the amount of e..
Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.
You develop the following information. Your firm has a target capital structure of 80% common equity, 5% preferred stock and 15% debt. The firm’s tax rate is 25%. The firm can issue up to $225,000 worth of debt at a before-tax cost of 10%. Then it wi..
When Jamal graduated from college recently, his parents gave him $1,460 and told him to use it wisely. Jamal decided to use the money to start a retirement account. After doing some research about different options, he put the entire amount into a ta..
Working capital and capital budgeting. Working capital investment is 25% of the anticipated first year sales for Wally’s Waffle House. The first-year sales are currently projected at $4,300,000. What is the internal rate of return of the ten-year pro..
If the Hardaway Corporation desires a return of 13 percent on its investment, how much should the lease payments be?
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