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DFB, Inc. expects earnings this year of $5.16 per share, and plans to pay a $3.30 dividend to shareholders. DFB will retain $1.86 per share of its earnings to reinvest in projects that have an expected return of 14.8% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares.
a. What growth rate of earnings would you forecast for DFB?
b. If DFB’s equity cost of capital is 12.2%, what price would you estimate for DFB stock?
Why is it more important to get the maximization of value ("value maximization") that the maximization of profit ("profit maximization") as a goal of enterprise management?
question 1. during periods when inflation is increasing interest rates tend to increase while interest rates tend to
General Mills has a $1,000 par value, 12 year bond outstanding with an annual coupon rate of 3.60% per year paid semi annually. Market interest rates on similar bonds are 12.70%. Calculate the bonds price today.
A firm wishes to maintain an internal growth rate of 6.9 percent and a dividend payout ratio of 20.0 percent. The current profit margin is 5.3 percent, and the firm uses no external financing sources. What must total asset turnover be?
You find a zero coupon bond with a par value of $10,000 and 26 years to maturity. The yield to maturity on this bond is 4.8 percent. Assume semiannual compounding periods.
When discounting cash flows:
A $150,000, 15-year, monthly payment mortgage loan carries an interest rate of 5.5%, plus three points. The points are financed. What is the lender’s expected annual yield if the loan is amortized over the full 15 years?
Then, after ten years, it will remit all accumulated earnings to the Netherlands. What is a drawback of using this approach?
What is the expected value of the investment in U.S. dollars? b) What is operational exposure? Discuss the factors that may influence the size of a company's operating exposure?
Imagine homer simpson invested 100000 5 years ago at a 14% annual interest rate. if he invested an additional 2200 a year at the beginning of each year for 10 years at the same 14 % annual rate, how much money will homer have 10 years from now? if ho..
When measuring the cost of capital, many companies measure the cost of the common stock in the company. However, does common stock have a cost when there is no obligation to pay the stockholders except upon liquidation of the company?
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $21,000 face value that matures in one year. The current market value of the firm's assets is $21,000. The standard deviation of the return on the firm's assets is 34 percent per year,..
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