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Garret Simpson Investments is evaluating a firm (Garp, Inc.) for recommendation to its clients and trying to evaluate the firm's current stock price. The firm is about to offer its shares to the public and had earnings last year of $2.50 a share, which the analysts believe is expected to grow by 20% next year. Similar firms in the industry are currently selling for price-earnings ratios ranging from ten to fifteen times current period earnings. However, these competitor firms are already public entities and have relatively low growth expectations for their earnings. What is your estimate of an appropriate price range for the shares of Garp? Defend your answer.
A $1,000 bond is issued with a coupon rate of 8 percent and 20 years to maturity five years ago. If this bond pays interest semi-annually, what is the value of this bond (TODAY) to an investor who requires an 8 percent rate of return?
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $137,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $592,000 p..
The Poseidon Swim Company produces swim trunks. The average selling price for one of their swim trunks is $84.44. The variable cost per unit is $22.14, Poseidon Swim has average fixed costs per year of $5,685. Determine the degree of operating levera..
Sam wants to start a small commercial bakery to supply gourmet deserts to local restaurants. He believes that with his product line and his connections in the restaurant business, Sam figures that once the business matures, he and the investor should..
Returns Year X Y 1 11 % 18 % 2 25 26 3 11 10 4 – 18 – 23 5 10 17 Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y.
A stock has had returns of 17.12 percent, 12.28 percent, 6.16 percent, 27.34 percent, and −13.69 percent over the past five years, respectively. What was the holding period return for the stock?
Suppose you want to buy a car for college. Your awesome uncle is willing to sell you his $20,000car which he no longer needs. He will only charge you 1% interest per year on the value of the car. Assuming 10 equal annual payments, what is the payment..
Consider a 15-year, $155,000 mortgage with a rate of .0595 percent. Eight years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate for..
E6-5: E6-5 (Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.
You were offered the opportunity to purchase either a simple interest note or a simple discount note with the following terms: $33,353 at 7% for 18 months. Based on the effective interest rate, which would you choose?
Cool Shoes (CS) had 2014 sales of $518 million. You expect sales to grow at 9% next year(2015), but, decline by 1% per year after until you settle to a long -run growth rate of 4%. You expect EBIT to be 9% of sales, increases in net working capital r..
Flower Valley Company bonds have a 12.50 percent coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 5 years from now. Compute the value of Flower Valley Company bonds if investors’ required rate of return..
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