What constant expected growth rate of the firm is in line

Assignment Help Corporate Finance
Reference no: EM13851379

a. Determine the price of a 10-year annuity paying $10 each year with opportunity cost of capital 10%. Also determine its annuity factor.

b. A growth stock with market capitalization rate of 20%, has 40% of its value from growth opportunities. Determine its price/earnings ratio (current price / earnings per share).

c. The total value of firm L is 100 ($million). The dividend policy of the firm is a 5% dividend yield; its debt policy is to be 75% equity financed. Investors expect a 16% return on stocks of firm L, and ask 4% interest on firm L's debt.

What constant expected growth rate of the firm is in line with these figures (assuming no new equity will be issued)? What then are the expected earnings in year 1 and in year 5?

Reference no: EM13851379

Questions Cloud

Briefly review dr drummond mcnaughtons : Briefly review Dr. Drummond McNaughton's guide for writing high-quality papers: Dr. Drumm's Writing Tips.
Monopolist instead of set of perfectly competitive firms : What is the externality associated with an individual driving on a congested highway? How do tolls help alleviate this externality? How should tools be set? (Hint: would you always want the toll to be the same all day?) The steel industry pollutes th..
Calculate socially optimal level of output for each firm : Suppose you work as research economist at the EPA. There are two firms that operate in a perfectly competitive marker. This implies that each has the same marginal benefit curve, which in this case is horizontal at MB= $100. Now calculate that social..
How much preplanning will you need to do : Do you expect to retire at a certain age? How much preplanning will you need to do? Do you expect to retire to a life of leisure, volunteer activity, new career, and so on? Where will you live-same family home, retirement community, part of the ye..
What constant expected growth rate of the firm is in line : What constant expected growth rate of the firm is in line with these figures (assuming no new equity will be issued)? What then are the expected earnings in year 1 and in year 5?
Draw donnas budget line : Donna buys goods X and Y. She can just afford the bundle X = 6 and Y = 11. She can also afford X = 12 and Y= 8. Each of these bundles exhausts her income. Draw Donna’s budget line. What is the ratio of the price of x to the price of y?
Assignment- validity of childhood trauma websites : Assignment- Validity of Childhood Trauma Websites. Help us build a collection of high-quality, scientifically based websites on Childhood Trauma
Two-player zero-sum game : Consider a 2 × 2 two-player zero-sum game in which the possible outcomes for Player 1 are win (payoff = 1) or lose (payoff = -1). The win probabilities corresponding to each of the four action pairs are UL : 1/3 UR : 2/3 DL : 3/4 DR : 1/4 a) (2 point..
Write down an equation for his budget line : Johnny Rotten consumes two commodities, namely garbage and vinyl records. He keeps the garbage in the backyard where it is eaten by goats and vermin. The reason he accepts the garbage is that people pay him $2 per sack for taking it. Write down an eq..

Reviews

Write a Review

Corporate Finance Questions & Answers

  Analysis of financial statement considering ratio analysis

analysis of financial statement considering ratio analysis and giving recommendation.submit a two-page 600 to 700 word

  A explain how inflation affects the rate of return required

a explain how inflation affects the rate of return required on an investment project and also explain the distinction

  Ineffective and interferes with free market movements

Does self-regulation work? Give examples of where it has worked well and where it has not and-one argument is that self-regulated businesses with amenities attract more (and better) labor, forcing other businesses to improve in order to hire.

  Evaluate share of the common stock

Which do you think will have the higher price (and why), a share of the preferred stock or a share of the common stock?

  Finding production costs

Samco producing has always buy a certain component part from supplier on the East Coast for dollar 50 per part. The supplier is reliable & has maintained the same value structure for years.

  You compare the beginning and the ending balances in cash

A fellow student says to you: the statement of cash lows is the easiest of the basic financial statements to prepare because you know the answer before you start. You compare the beginning and the ending balances

  Calculate the annual profit

An employer uses a final payment method to estimate retirement payouts to its employees. The yearly payout is 3% of the average salary over the employees' last 3-years of service times the total years employed.

  What is the required return on okefenokee stock

What is the required return on Okefenokee stock, estimate the company cost of capital and what is the discount rate for an expansion of the company's present business?

  Find the firms after-tax cost of debt on the bond

Belton is issuing a 1,000 dollar par value bond that pays 7% yearly interest and matures in 15 years. Investors are willing to pay $958 for the bond.

  Why would a profitable firm ever need to file for bankruptcy

why would a profitable firm ever need to file for bankruptcy and what 2 key issues does working capital policy involve

  Define goodwill in the context of purchase accounting

A high interest-rate environment and a higher cost of borrowing would have what effect on an acquisition purchase price for a private equity buyer - Define goodwill in the context of purchase accounting arising from an acquisition transaction-what ..

  Your friend is facing an important decision she was

your friend is facing an important decision. she was recently hired by a large bank xyz as a junior associate. her

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd