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A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5 percent over the last 15 years and you expect this to continue. (LG 3-3)
a. If the required rate of return on the stock is 12 percent, what is its fair present value?
b. If the required rate of return on the stock is 15 percent, what is its expected price four years from today?
If you were a small business owner would you implement an activity-based costing system. What potential benefits or pitfalls do you foresee? Discuss the risk associated with being over or under leveraged.
Explore the capital budgeting techniques covered in the unit, NPV, PI, IRR, and Payback. Compare and contrast each of the techniques with an emphasis on comparative strengths and weaknesses.
Air Jet Best Parts, Inc. would like issue 20- years’ bonds to obtain remaining funds for the New Mexico plan. The company currently has 7.5% semiannually coupon bonds in the market that sell for $1,062 and mature in 20 years. What coupon rate should ..
The VP of Sales for a manufacturing firm has just presented a decision tree for determining whether or not to conduct market research prior to introducing a new product to the US market. Ignoring the actual calculations, how do you evaluate such a pr..
Boatler Used Cadillac Co. requires $1,030,000 in financing over the next two years. The firm can borrow the funds for two years at 10 percent interest per year. Determine the total two-year interest cost under each plan. Short-term variable-rate pla..
The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 8% per year. Carpetto's common stock currently sells for $20.50 per share; its last dividend was $1.50; and it will pay a $1.62 dividend at the ..
An investor has one-year investment horizon. She is considering purchasing a three-year coupon bond with $1000 par value and 8% annual coupon rate. The current annual yield to maturity is 8%. What is the expected total return for this bond?
Automated Manufacturers uses high-tech equipment to produce specialized aluminium products for its customers. Each one of these machines costs $1,480,000 to purchase plus an additional $49,000 a year to operate. The machines have a 6-year life after ..
Southern Mfg., Inc., is currently operating at only 86 percent of fixed asset capacity. Current sales are $620,000. How fast can sales grow before any new fixed assets are needed?
You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 8.08 percent, compounded annually. How much is this investment worth today? What is the present value ..
Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC: 12...
Three Corners Markets paid an annual dividend of $1.37 a share last month. Today, the company announced that future dividends will be increasing by 2.8 percent annually. If you require a return of 11.6 percent, how much are you willing to pay to purc..
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