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Directions: You MUST show ALL of your work to receive credit on the problems. There will be significant point reductions if you do not show your work. All calculations should be completed to at least 2 decimal places.
1) A stock is selling today for $40 per share. At the end of the year, it pays a dividend of $2 per share and sells for $44.
A) What is the total rate of return on the stock?
B) What are the dividend yield and percentage capital gain?
C) Now suppose the year- end stock price after the dividend is paid is $ 36. What are the dividend yield and percentage capital gain in this case?
D) Why is the dividend yield the same in parts (b) and (d)?
2. The Costaguanan stock market provided a rate of return of 95%. The inflation rate in Costaguana during the year was 80%. In the United States, in con-trast, the stock market return was only 12%, but the inflation rate was only 2%. Which country’s stock market provided the higher real rate of return?
Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation.Debt: One thousand bonds were issued five years ago at a coupon rate of 11%
MF Corp. has an ROE of 12% and a plowback ratio of 50%. If the coming year's earnings are expected to be $4 per share, at what price will the stock sell? The market capitalization rate is 14%.
Eddie's Bar and Restaurant Supplies expects its revenues and payments for the first part of the year to be: Sales payments January $24,000 $18,000 February $20,000 $21,300 March $35,000 $19,100 April $22,000 $22,400 May $28,000 $14,700 Eighty percent..
Mr. Smith has an income of $40,000 this year and $60,000 next year. He can invest in a project that costs $30,000 this year, which generates an income of $36,000 next year. The market interest rate is 10%. What will be his consumption next year if Mr..
A 20-year Treasury bond is issued with face value of $1,000, paying interest of $40 per year. If market yields increase shortly after the T-bond is issued, what is the bond’s coupon rate? The firm wishes to issue additional bonds to the public at fac..
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 20...
You have an outstanding student loan with required payments of $550 per month for the next four years. If you are required to continue making payments of $550 per month until the loan is paid off, what is the amount of your final payment? What effect..
In mid-2015, Coca-Cola Company (KO) had a share price of $39. Its dividend was $1.00 per year, and you expect Coca-Cola to raise this dividend by approximately 7% per year in perpetuity. If Coca-Cola’s equity cost of capital is 8%, what share price w..
1. How much are cash dividends? 2. What was the amount of the cash receipt from the sale of plant assets?
The Ace Trucking Company wants to sponsor a new Profit Sharing Plan for the benefit of their U.S. based employees for this year 2015. The plan must be established and funded by:
Suppose Clorox can lease a new computer data processing system for $975,000 per year for five years. Alternatively, it can purchase the system for $4.25 million. If Clorox will depreciate the computer equipment on a straight-line basis over the next ..
Find the periodic payment R required to amortize a loan of P dollars over t years with interest charged at the rate of r% year compounded m times a year.
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