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Which of the following is the appropriate way to calculate the price of a share of a given company using the free cash flow valuation model?
A) P0 = Div1/(rE - g)
B) P0 = PV(Future Free Cash Flow of Firm)/(Shares Outstanding0)
C) P0 = [Div1/(rE - g)]/(Shares Outstanding0)
D) P0 = (V0 + Cash0 - Debt0)/(Shares Outstanding0)
A 1000 seven-year 6% bond with semi-annual coupons is redeemable for 1065. It was originally purchased at issue for 970. It is sold after 45 months for 995. Find the accrued interest by the theoretical method using the new yield to maturity.
"Earnings per share" (EPS) is the most featured, single financial statistic about modern corporations. Daily published quotations of stock prices have recently been expanded to include for many securities a "times earnings" figure that is based on..
Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 24 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid ..
JJ Industries will pay a regular dividend of $2.3 per share for each of the next four years. At the end of the four years, the company will also pay out a liquidating dividend. If the discount rate is 7 percent, and the current share price is $64. Wh..
Valley Fruit Limited is currently assessing the riskiness of the market with an intention of investing. The company currently has excess cash on its balance sheet to invest. Senior management wants to invest the excess cash. Calculate the expected re..
Erika and Kitty, who are twins, just received $35,000 each for their 25th birthdays. They both have aspirations to become millionaires. Each plans to make a $5,000 annual contribution to her "early retirement fund" on her birthday, beginning a year f..
A firm has current assets that could be sold for their book value of $20 million. The book value of its fixed assets is $58 million, but they could be sold for $88 million today. The firm has total debt with a book value of $38 million, but interest ..
You have $12,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 8 percent. If your goal is to create a portfolio with an expected return of 9.59 percent, how much ..
Your firm sells for cash only; but it is thinking of offering credit, allowing customers 90 days to pay. Customers understand the time value of money, so they would all wait and pay on the 90th day. To carry these receivables, you would have to borro..
The Wall Street Journal reports that the current rate on 5-year Treasury bonds is 2.70 percent and on 10-year Treasury bonds is 5.05 percent. Assume that the maturity risk premium is zero. Calculate the expected rate on a 5-year Treasury bond purchas..
Suppose you buy a round lot of Francesca Industries stock on 55 percent margin when the stock is selling at $20 a share. The broker charges a 10 percent annual interest rate, and commissions are 3 percent of the stock value on the purchase and sal..
Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $3.25 dividend per share (D0 = $3.25). The stock's price is currently $21.75, its dividend is expected t..
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