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Journal
Capital Budgeting and Dividend Policy
We examined two very important topics in finance this week; Capital Budgeting and Dividend Policy.
Critically reflect on the importance of selecting the right projects in which to invest capital. Do we always select those projects that have the highest return on investment? What other factors play into capital budgeting decisions?
We also looked at dividend policy. What incentive is there for a company to pay dividends? What signals does dividend policy provide to investors?
An air purifier for use in manufacturing semiconductors is placed in service with a first cost of $50,000. It will be used for 8 years, have an annual gross income less operating expenses of $14,000 and will have no salvage value. Corporate income ta..
Company abc had a profit margin of 6.25% , total asset turnover of 1.5 and an equity multiplier of 1.8. What was the firms ROE? What would happen if the equity multiplier went up to 2.5?
Suppose you are a U.S. investor who is planning to invest $825,000 in Mexico. Your Mexican investment gains 10.4 percent. If the exchange rate moves from 12.6 pesos per dollar to 12.9 pesos per dollar over the period, what is your total return on thi..
Using lagged returns rt-1, rt-2, rt-3 as input, build a 3-2-1 feed-forward network to forecast 1-step ahead returns. - Calculate the mean squared error of forecasts.
You are due to receive ten annual payment of $1500 each,the first payment to be received 5 years from now. You can invest each of these payments into an account that offers a 4 percent, semi-annual interest rate. Compute the present value ( t=0) of t..
(loan amortization) On December 31 Beth bought a yacht for $50,000. She paid $14,000 down and agreed to pay the balance in 13 equal annual installments that include both the principal and 15 percent interest on the declining balance. How big will the..
Friendly’s Quick Loans, Inc., offers you $4.50 today but you must repay $6.05 when you get your paycheck in one week (or else). What is the effective annual return Friendly’s earns on this lending business? If you were brave enough to ask, what APR w..
The _________________ (before-tax cost of debt, after-tax cost of debt) is the interest rate that a firm pays on any new debt financing. Revive Co. can borrow at any interest rate of 12.5% for a period of eight years. its marginal federal-plus state ..
The curse of competitive markets A. May be lessened by obtaining patents for new ideas that protect companies from competitors OR B. Implies that profitable industries will become smaller as companies drop out to avoid competition OR C. Means that mo..
Assume that you have received a capital expenditure request for $52,000 for plant equipment and that you are required to do a justification analysis using capital budgeting techniques. The company’s cost of capital is 12% and the equipment (investmen..
A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0?
Calculate the NPV, ROR, payback period and discounted payback period for following After Tax Cash Flow, assuming minimum discount rate of 12%. Please show your work and include all the required equations.
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