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Summit Systems has an equity cost of capital of 11.5%, will pay a dividend of $1.00 in one year, and its dividends had been expected to grow by 7.0% per year. You read in the paper that Summit Systems has revised its growth prospects and now expects its dividends to grow at a rate of 3.0% per year forever. 1. What is the drop in value of a share of Summit Systems stock based on this information? 2. If you tried to sell your Summit Systems stock after reading this news, what price would you be likely to get? Why?
Returns Year X Y 1 10 % 15 % 2 24 25 3 10 14 4 – 17 – 22 5 10 16 Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y.
Russell’s has annual revenue of $387,000 with costs of $216,400. Depreciation is $48,900 and the tax rate is 30 percent. The firm has debt outstanding with a market value of $182,000 along with 9,500 shares of stock that is selling at $67 a share. Th..
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $224,000, has a four-year life, and requires $71,000 in pretax annual operating costs. Calculate the EAC for both conveyor belt sys..
This bond indenture provisions would not benefit bondholders
You would like to buy shares of Sirius Satellite Radio (SIRI). The current ask and bid quotes are $4.14 and $4.11, respectively. You place a market buy order for 580 shares that executes at these quoted prices. How much money did it cost to buy these..
Future value calculation Without referring to the preprogrammed function on your financial calculator, use the basic formula for future value along with the given interest rate, r, and the number of periods, n, to calculate the future value of $1 in ..
In which activities do investment banks engage? Which of these activities are considered the core activities of investment banks?
KeySpan Corp. is planning to issue debt that will mature in 2035. In many respects, the issue is similar to currently outstanding debt of the corporation. Using Table 11-3, identify: The yield to maturity on similarly outstanding debt for the firm, i..
A five-year project has an initial fixed asset investment of $330,000, an initial NWC investment of $34,000, and an annual OCF of −$33,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Suppose you plan to retire at age 70, and you want to be able to withdraw an amount of $62,000 per year on each birthday from age 70 to age 100 (a total of 31 withdrawals). If the account which contains your savings earns 5.7% per year simple interes..
On March 31, 2013, Mike's Bike Shop had an outstanding accounts receivable of $19,000. Mike's sales are roughly evenly split between credit and cash sales, with the credit sales collected half in the month after the sale and the remainder 2 months af..
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $732 per set and have a variable cost of $362 per set. The company has spent $152,000 for a marketing study that determined the company will sell 75,200 sets per year ..
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