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Yippie is a recent startup and is currently not paying any dividends. The earnings in 2006 are expected to be $4 a share and analysts predict that Yippie’s earnings will grow at an annual rate of 30% for the next three years (until 2009).
The return of new investments of Yippie is expected to be 10% indefinitely starting in 2010. Yippie is expected to start paying annual dividends in 2009 and these dividends will be equal to 60% of the earnings. Assume that all earnings accrue at the end of the year and that the dividends are also paid once at the end of the year. Yippie has a beta of 1.5, the market return is 7%, and the risk-free rate is 2%.
a. What is the intrinsic value of Yippie’s stock in April 2006 using the dividend discount model?
Equipment costing $20,000 that is a MACRS 3-year property is disposed of during the second year for $12,000. Calculate any depreciation recapture, ordinary losses, or capital gains associated with disposal of the equipment.
Currently interest rates continue to be close to historic lows, resulting in low borrowing costs for consumers. Savers, on the other hand, continue to struggle in this low interest rate environment. Currently a 6 month certificate of deposit pays abo..
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The salvage value at the end of the 10 years is expected to be $1,500,000, which is solely the value of the land. The firm's tax rate is 40 percent, and the firm's discount rate is 15 percent. Based on a discounted cash-flow analysis, should the in..
What is the nominal interest rate on a 7-year Treasury security? Round your answer to two decimal places.
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Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.
You’re prepared to make monthly payments of $240, beginning at the end of this month, into an account that pays 9 percent interest compounded monthly. How many payments will you have made when your account balance reaches $63,000?
A foundry uses 3,600 tons of pig iron per year at a constant rate. The cost per ton delivered to the foundry is $145. It costs $92 to place an order and $18 per ton per year for storage. Find the minimum-cost purchase quantity.
1 the type of risk that can be diversified away is called .a unsystematic riskb systematic riskc nondiversifiable riskd
Genoa ltd is about to start a new project that will have a Net Present Value of $100 million. The stock currently trades at $105 and there are 2,000,000 shares outstanding. In order to start the project the company needs to raise $400,000,000 in new ..
Write a summary of the attached Article by Mishkin, Frederic S - Over the Cliff: From the Subprime to the Global Financial Crisis';
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