Company Z-prime’s earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends.
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The capital budget forecast for the Santo Company is $800,000. The CFO wants to maintain a target capital structure of 40% debt and 60% equity, and it also wants to pay dividends of $500,000. If the company follows the residual dividend policy, how m..
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The house you want to buy costs $260 thousand. You plan to make a cash down payment of 10 percent, and borrow the rest in a 30 year mortgage at 4.8 percent APR. What will be the amount of your monthly mortgage payment?
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Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,400,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
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The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.4 million in annu..
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Consider a project with an initial outlay of $1,000 and yearly cash flows as follows: -200, -100, 300, 300, 300, 100, 100, 200, 700, 400, and 100. Calculate the classical payback period assuming 10% cost of funds.
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Assume that a new project will annually generate revenues of $1,900,000 and cash expenses (including both fixed and variable costs) $1,050,000, while increasing depreciation by $210,000 per year. In addition the firm’s tax rate is 36%. Calculate the ..
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DSMN's dividend policy is to pay out 50 percent of each year's earnings as dividends. DSMN's marginal tax rate is 40 percent, and its average tax rate is 35 percent. Compute DSMN's cost of internal equity capital.
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A put option is currently worth $10. Just one second later, the stock price decreased by $5 to $45. The absolute value of the put option delta is 1/2. a. Approximately, what would the new put option be? b. using the original stock price of $50, and a..
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First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made a deposit of $8,500 in each bank, how much more money would you earn from your Second Ci..
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Bank A prefers borrowing at a floating rate while a non-financial firm prefers borrowing at a fixed rate. However, the fixed and floating rate facing the bank is 3% and 3-month LIBOR plus 8 basis points, respectively, while the fixed and the floating..
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A project has the following estimated data: price = $64 per unit; variable costs = $42 per unit; fixed costs = $15,000; required return = 15 percent; initial investment = $28,000; life = four years. Ignoring the effect of taxes, what is the accountin..
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