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A company is expected to have earnings of $3.46 per share next year, $4.89 in two years, and $5.82 in three years. The dividend payout ratio is expected to remain at 30% over the next three years. You estimate the risk-free rate to be 3% per year and the expected market risk premium to be 5% per year. In two years, you expect the lagging PE ratio to be 22. The beta of the stock is 1.4. What would be an appropriate estimate of the stock price today? (Answer to the nearest penny, i.e. 55.55 but do not use a $ sign).
A firm has a capital structure with $100 million in equity and $100 million of debt. The cost of equity capital is 14% and the pretax cost of debt is 8%. If the marginal tax rate of the firm is 30%, compute the weighted average cost of capital of the..
Canadian Bacon Inc. financial statements are presented in the table below. Based on the information in the table, calculate the firm’s the operating profit margin. Round the answers to two decimal places in percentage form. (Write the percentage sign..
Dr. Bozner is considering purchasing a bond with face value of $2500 and a bond rate of 8% payable semiannually. The bond has a remaining life of ten years. How much should Dr. Bozner pay for the bond in order to yield a return of 10% compounded semi..
An economic indicator is data, usually of macroeconomic scale, used by investors to interpret current or future investment possibilities and to judge the overall health of an economy. Identify and define five economic indicators.
Fairfax Paint operates stores in Virginia. The firm is evaluating the Vienna project, which would involve opening a new store in Vienna. The tax rate is 45 percent. What is the relevant operating cash flow (OCF) for year 1 of the Vienna project that ..
A closed-end fund has total assets of $379 million and liabilities of $640,000. there are 36 million shares outstanding. what is the premium or discount if the shares are currently selling for $9.85 each?
Karen just purchased a stock costing $33 on margin, paying $23 and borrowing the remainder from a brokerage firm at 15 percent annual interest. The stock pays an annual dividend of $2. If Karen sells the stock after one year at a price of $50, what i..
Which of the following properties is not eligible for the §179 expense election when purchased? Jake purchased a $300,000 earthmover for his business. He sold the earthmover for $245,000 after taking $210,000 of depreciation. What is the nature and a..
For each of the following situations, what amount would the insurance company pay?
A bond that pays interest annually yields a rate of return of 6.25 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond?
What are educational harms? What are social harms? What are physical harms? What are psychological harms?
Here is some information about Stokenchurch Inc.: Beta of common stock = 1.2 Treasury bill rate = 4% Market risk premium = 7.5% Yield to maturity on long-term debt = 6% Book value of equity = $440 million Market value of equity = $880 million Long-te..
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