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Value of Operations of Constant Growth Firm
EMC Corporation has never paid a dividend. Its current free cash flow of $360,000 is expected to grow at a constant rate of 5.2%. The weighted average cost of capital is WACC = 13%. Calculate EMC's estimated value of operations. Round your answer to the nearest dollar.
Default risk premium on AA+ rated bonds are 3% and BBB- rated bonds are 6%. The marginal tax rate for both companies is 30%. What is the after tax cost of debt for GE and Alstom if the risk free rate (10 year US Treasury rate) is 2.5% ?
Which of the following is not an example of an anomaly to the efficient market hypothesis?
The Florida lottery agrees to pay the winner $289,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.10?
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.60 coming 4 years from today.
Crawley, inc. has a line of credit with hnc bank that allows the company to borrow up to $800,000 at an interest rate of 12 percent. However they must keep a company's sting balance of 18 percent of any amount borrowed on deposit at the bank. They do..
Beginning three months from now, you want to be able to withdraw $2,100 each quarter from your bank account to cover college expenses over the next three years. If the account pays .43 percent interest per quarter, how much do you need to have in you..
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.10 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
Consider a 15-year, $150,000 mortgage with a rate of .0590 percent. Nine years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate for ..
After getting acquaint with the financial markets products and services, Celestila Moonn, an Global Affairs major student, decided to invest in mutual funds and hedge funds; Briefly discuss should Moonn make her investment decision based on her advis..
There is a basic trade-off between efficiency and equity because A. Income redistribution tends to reduce incentives for efficient behavior. B. People who are efficient dislike equity. C. Pareto improvements can only be made by sacrificing efficiency..
How do we calculate the payback period for a proposed capital budgeting project? What are the main criticisms of the payback method?
As part of the company’s continues commitment to product innovation, the Executive Committee of PLE is debating whether to replace its original tractor model, the PLE-Classic, with a new model, the PLE-Tough, which would appeal to a younger clientele..
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