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The management of a conservative firm has adopted a policy of never letting debt exceed 30 percent of total financing. The firm will earn $10,000,000 but distributed 40 percent in dividends, so the firm will have $6,000,000 to add to retained earnings. Currently the price of the stock is $50; the company pays a $2 per share dividend, which is expected to grow annually at 10 percent. If the company sells new shares, the net to the company will be $48. Given this information,
what is the a. cost of retained earnings; b. cost of new common stock? The rate of interest on the firm's long-term debt is 10 percent and the firm is in the 32 percent income tax bracket. If the firm issues more than $2,400,000, the interest rate will rise to 11 percent.
What are the advantages and disadvantages of issuing both types of shares? Which type of shares would you decide to issue and why? What affect would the new issuance have on the financial statements?
Memofax, Corporation produces memory enhancment kits for fax equipments. Sales have been very erratic with some months showing a profit and some months showing a loss.
A company currently earns $1 per share. A financial analyst believes that earnings will grow yearly at the rate of 10% for five years and then decline to 5%.
Illustrate out the following terms and describe how they affect one another. More specifically, for what purposes are they employed and how do they relate to one another: efficient portfolio, individual investor, short selling, Sharpe ratio, beta ..
How should a "gain" from the sale of treasury stock be reflected when applying the cost method of recording treasury stock transactions?
Grateway Corporation has a weighted average cost of capital of 11.5%. Its target capital structure is 55 percent equity and 45% debt. The company has sufficient retained earnings to fund the equity portion of its capital budget.
Assume you are the money manager of a four million investment fund. The fund consists of four stocks with the following investments and betas:
A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5 percent, and the expected constant growth rate is g = 6.4 percent.
A 1949 Vincent Black Shadow Series V motorcycle sold for about $45,000 in 1996. If you were fortunate enough to have bought one new for $630 in 1949,
Discuss and explain the concept of incremental cash flow. Why is this important to distinguish from other cash flows?
Computaion of variance of a stock on different economy and what is the coefficient of variation on the company's stock
Explain what was the market's reaction to the self-reported earnings announcement and briefly examine the reported earnings per share; what is the company's earnings outlook for the coming year?
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