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You establish a straddle on Firm G using call and put options with a strike price of $87. The call premium is $9.5 and the put premium is $13. What are the breakeven prices?
Josh has decided to take a course at the local community college that could help him get a promotion at work. The course begins at 5 p.m. and goes until 9 p.m. on Monday nights. Josh normally works until 5 p.m. each day, but because of the drive time..
A company shares pay an annual dividend of $10 this year (D0 in the textbook) and promises that its dividend will grow at a rate of 4% per year for the indefinite future. The risk-free interest rate is 3%. The asset holder has $20,000 free cash that ..
Use the data in the following table to compute the percentage change in EBIT that would occur if sales were to increase by10%.
The CCC Venture has issued convertible preferred stock to its venture investors. Each share of preferred stock is convertible into 0.80 share of common stock and pays an annual cash dividend of $0.25. If each share of preferred stock has a market val..
Suppose a company pays an annual dividend of $3.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6 percent per year indefinitely. If the required rate of return on this stock is 12 percent, what ..
Company X is considering issuing 10,500 new shares to help finance the purchase of additional plant and equipment. If Mr. Jim wishes to maintain his proportionate ownership in the company, what is the additional dollar amount he will be required to m..
Dusit is financed 33% by debt yielding 8.3%. Investors require a return of 15.3% on Dusit’s equity. What is the company’s weighted-average cost of capital if the corporate tax rate is 35%? What would be the company’s cost of capital if it were exempt..
The Cracker Barrel has a beta of 0.98, a dividend growth rate of 3.2 percent, a stock price of $33 a share, and an expected annual dividend of $1.06 per share next year. The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent...
How much debt is outstanding in a firm that has calculated the present value of a perpetual tax shield to be $300,000 if the tax rate is 35% and the debt carries a 10% rate of return?
A firm is looking to invest in a new sports drink. They must invest $4 million today and another $4 million in one year. They expect that in two years, they will receive $3 million in free cash flow, and this will continue for 5 years (so the final $..
Riverton Mining plans to purchase or lease $435,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over five years, after which it will be worthless. Is Riverton better off leasing the equipmen..
A company is growing and doesn't expect to initiate dividents for 10 years, at which time it will pay an annual dividend of $5 per share. At that time, the company expects its dividends to grow at 6% forever. What is the most you would pay today for ..
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