Stock Valuation and Required Return [LO1] Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.00 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company’s stock is 8 percent, 11 percent, and 14 percent, respectively. What is the stock price for each company? (Round your answers to 2 decimal places. (e.g., 32.16)) Stock price Red, Inc. $ Yellow Corp. $ Blue Company $

## Cost of capital will result in a decrease in projects irrOther things held constant, an increase in the cost of capital will result in a decrease in a project's IRR. ESOPs were originally designed to help improve worker productivity, but today they are also used to help prevent hostile takeovers. Market ri.. |

## How does a bank make a profit on loansHow does a bank make a profit on loans? Discuss the importance of loans in attracting a borrower's other business with a financial institution. |

## Which security is riskierSecurity A has an expected return of 7% a standard deviation of returns of 35%, a correlation coefficient with the market of -0.3, and a beta coefficient of -1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a cor.. |

## What was the price-cash flow ratioWeston Corporation had earnings per share of $1.36, depreciation expense of $439,200, and 180,000 shares outstanding. What was the operating cash flow per share? If the share price was $49, what was the price-cash flow ratio? |

## What is external rate of returnA proprietor is considering a new investment of $1,000, with expected returns of 150 per year for 1st 3 yr, 1150 in 4th, MARR = 8%, What is external rate of return? |

## Find the periodic paymentFind the periodic payment R required to amortize a loan of P dollars over t years with interest charged at the rate of r% year compounded m times a year. |

## A share of common stock just paid dividendA share of common stock just paid a dividend of $1.01. If the expected long-run growth rate for this stock is 1.5%, and if investors' required rate of return is 6.1%, what is the stock price? |

## The bond is currently yielding-payments are made annuallyWhat is the current price of a 20-year 6% coupon bond that has 5 years left until maturity? The bond is currently yielding 8.4%. Payments are made annually. |

## Calculate the monthly payments-annual rate of interestAn apartment complex is valued at $3 million. a hedge fund is looking to buy the property with a $500,000 down payment and a 10 year loan with an annual rate of interest 3.5%. Calculate the monthly payments. After making the monthly payments for 3 ye.. |

## What are the companys days sales in receivablesA company has net income of $186,000, a profit margin of 8.9 percent, and an accounts receivable balance of $125,370. Assuming 75 percent of sales are on credit, what are the company’s days sales in receivables? (Use 365 days a year. Do not round int.. |

## Create a retirement party fundSuppose that you want to create a "retirement party fund" for yourself and place $50 in a bank account for each of the next 20 years. If that account earns an annual rate of return of 7%, how much will be in your retirement party fund at the end of t.. |

## Systematic risk increases-factors remaining constantIBM’s stock is currently selling at $ 11.44. This year the firm had earnings per share of $2.80 and the current dividend is $ 0.68. Earnings are expected to grow 7% a year in the foreseeable future. The risk free rate is 10 percent and the expected m.. |

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