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Sam Sharp purchased 100 shares of Electric Lighting Inc. (ELI) one year ago for $70 per share, and he also received dividends of $7 per share since then. Now that ELI's stock price has increased to $73.2, Sam has decided to sell his holdings. What is Sam's gross (pretax) and after-tax return on this investment, assuming that he faces a 15% tax rate on dividends and capital gains? Round you answers to two decimal places.
Gross %=
After tax %=
Consider the different uses of free cash flow to a firm. Which use is the most optimal? Does the cost of capital matter in your decision? Defend your answer and cite your sources.
Counts accounting has a beta of 1.25. The tax rate is 35%, and Counts is financed with 45% debt. What is Counts' unlevered beta?
According to market values, 25% debt, 10% preferred and 65% equity. The YTM on the firm's debt is currently 7.5% and the firm's marginal tax rate is 35%. The overall market rate of return is 12% and the firm plans on using retained earnings exclusive..
JW Enterprises is considering a new marketing campaign that will require the addition of a new computer programmer and new software. The programme will occupy an office in JW's current building and will be paid $8,000 per month. The incremental expen..
Finco must determine how much investment and debt to undertake during the next year
Choose one stock index (or one sector index) and one bond index. Go to yahoo/Finance and download 5 years of monthly data into your Excel for each stock index (Sector index) and bond index. Calculate the monthly rate of return (P1-P0/P0) for stock an..
Most of the examples in the text are medium or large companies. Think about the concepts of risk which are part of this section of the course in the context of the size of a firm. Would these change if the firm were large? Small ? Medium-sized? Any ..
Find the duration of a 8% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 7.3%. What is the duration if the yield to maturity is 11.3%? (Do not round intermediate calculations.
An individual has $110,000 in a retirement account. At the beginning of each year she withdraws $10,000 while earning 10% a year on her money. How much money will be in the account in 20 years? How much will she have in the account after 40 years? Ex..
A stock sells for $20 per share and you purchase 100 shares. If the value of stock doubles to $40 in 1 year what would be the total return? What would be the total return if the required margin where:
James Fromholtz is considering whether to invest in a newly formed investment fund. The fund’s investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. The fund sponsor has suggested to James that the fund’..
A share of common stock just paid a dividend of $1.51. If the expected long-run growth rate for this stock is 2.5%, and if investors' required rate of return is 7.4%, what is the stock price?
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