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The Absolute Zero Co. just issued a dividend of $2.80 per share on its common stock. The company is expected to maintain a constant 5.8 percent growth rate in its dividends indefinitely.
If the stock sells for $56 a share, what is the company’s cost of equity?
Union Local School District has bonds outstanding with a coupon rate of 3.7 percent paid semiannually and 26 years to maturity. The yield to maturity on these bonds is 4.3 percent and the bonds have a par value of $10,000. What is the price of the bo..
The last dividend was $2.50, but now is expected to grow at 10% forever, and Ke remains 25%, what would the price be now? Things are not as great as originally thought. The last dividend was $2.50. It is expected to grow by 10% for only the next 3 y..
What is an example of a company that uses debt yet still is able to keep their cost of equity down and maximize shareholder value. Be thorough in your analysis and explanations? (Not APPLE).
Illinois Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 9.0 percent, payable annually. The one-year interest rate is 9.0 percent. What will the market value of these bonds be if they are noncallable? What will..
You would like to establish a trust fund that would pay annual payments to your heirs of $104 thousand a year forever. You expect the trust fund to earn an average return of 7.57 percent. How much do you need to deposit into this trust fund today to ..
Heginbotham Corp. issued 20-year bonds two years ago at a coupon rate of 8.9 percent. The bonds make semiannual payments. If these bonds currently sell for 110 percent of par value, what is the YTM?
How could Global use options to hedge this risk? Which type of options should be used-puts or calls? Set up a hedge using the futures market for silver that will protect Global against increases in the price of silver over the coming 6 months.
It is often said that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?
What would an investor be willing to pay for common stock in a firm that has no growth opportunities but pays dividends of $6.00 per year, starting today? The next dividend will be paid in exactly 1 year. The required rate of return is a stated annua..
Johnny Cake Ltd. has 8 million shares of stock outstanding selling at $17 per share and an issue of $40 million in 10 percent annual coupon bonds with a maturity of 18 years, selling at 92.5 percent of par. Assume Johnny Cake’s weighted-average tax r..
The market capitalization rate for Admiral Motors Company is 10%. Its expected ROE is 15% and its expected EPS is $7. If the firm’s plowback ratio is 50%. Calculate the growth rate. What will be its P/E ratio?
You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $770. These bonds make annual payments and mature 7 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 11 p..
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