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Cost of Equity with and without Flotation Javits & Sons' common stock currently trades at $31.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year (D1 = $3.00), and the constant growth rate is 6% a year.
What is the company's cost of common equity if all of its equity comes from retained earnings? Round your answer to two decimal places. %
If the company were to issue new stock, it would incur a 8% flotation cost. What would the cost of equity from new stock be? Round your answer to two decimal places. %
What is ri, the required rate of return on Stock i? Round your answer to two decimal places. Now assume that rRF remains at 6% but rM increases to 13%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answe..
Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out i..
The correlation coefficient between stock B and the market portfolio is 0.8. The standard deviation of stock B is 35% and that of the market is 20%. Calculate the beta of the stock.
Use several alternative discount rate values (1% to 10%) to investigate the sensitivity of the present value of net benefits of the dam in exercise (1) to the assumed value of the real discount rate. Determine the "breakeven" value of the discount ra..
Austin Power Company issued $1000 bonds that have an annual coupon rate of 9.5%. The present market value of the bond is $1250. If the bonds have 10 years remaining until maturity, what is the current yield on Austin's bonds?
What are the advantages and disadvantages of a call provision from the viewpoints of both a firm and its bondholders? If you were the CEO of a firm, would you recommend a call provision for a new bond issue? Why or why not? Can you identify a recent ..
Ribbon Industries reported sales of $3 million and net income of $400,000 for 2010. The retained earnings balance at the end of 2012 is $7 million. Ribbon Industries has a dividend payout ratio of 30%. If sales are expected to increase by 25% next ye..
The budget rate, the lowest acceptable dollar per pound exchange rate, was therefore established at $1.5 per British pound. Any exchange rate below would result in Dayton actually losing money on the transaction.
Examine the duration and convexity of three bond issuances. Determine how sensitive the bond valuations are to changes in interest rates. Value the bonds if interest rates rise, fall, or remain unchanged.
Calculate NPV and IRR for the following investment. Initial investment = $1,000,000 machine, the project term is 6 years, sales for year 1 are estimated to be $1,000,000, and will grow by 7.5% per year through year 5, sales for year 6 = $500,000, var..
You are the CEO of XYZ manufacturing company. You have decided that you would like to market your product to Turkey. What are the factors you may face expanding into a foreign market? How might you mitigate those barriers?
The dividend for Weaver, Inc., is expected to grow at 15 percent for the next 4 years before leveling off at a 5 percent rate indefinitely. If the firm just paid a dividend of $1.08 and you require a return of 14 percent on the stock, what is the mos..
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