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Preston Woods has 17,500 shares of stock outstanding along with $408,000 of interest bearing debt. The market and book values of the debt are the same. The firm has sales of $697,000 and a profit margin of 6.8 percent. The tax rate is 35 percent, the debt-equity ratio is 40 percent, and the price-earnings ratio is 11.8. The firm has $130,000 of current assets of which $41,200 is cash. What is the enterprise value multiple?
Determine the future values $5,000 is invested in each of the following situations:
The next year the common stock of Gold Corp will pay a dividend of 2.10 per share. If the company is growing at a rate of 4.03 percent per year and your required rate of return is 15% what is gold’s company stock worth to you? Golden Rod Corp’s prefe..
An investment of $83 generates after-tax cash flows of $44.00 in Year 1, $72.00 in Year 2, and $127.00 in Year 3. The required rate of return is 20 percent. The net present value is what?
Describe the VAR approach to market risk. Is VAR related to the normal distribution? Can VAR handle extreme events (black swans)? Explain how VAR is applied to portfolios.
Triangle Pediatrics is faced with multiple investment alternatives that pay interest as indicated in answers (a) through (e). If we assume Triangle Pediatrics has $100 to invest today, which alternative will give it the most money at the end of one y..
Suppose you can save $10,000 every year for 30 years until your retirement. What interest rate do you have to earn (assuming annual compounding) to have $500,000 when you retire?
Is there credit risk in an interest rate swap with an intermediary bank serving as the swap dealer? Describe when default losses might arise and which party is at risk. Explain how credit risk can be reduced.
Stock A has a beta of .6, and investors expect it to return 5%. Stock B has a beta of 1.4, and investors expect it to return 7%. Use the CAPM to find the expected rate of return on market and the market risk premium.
A stock has an expected return of 10.5 percent, its beta is 1, and the risk-free rate is 6.25 percent. What must the expected return on the market be?
Assume the returns on an asset are normally distributed. Suppose the historical average annual return for the asset was 6.7 percent and the standard deviation was 12.6 percent. What is the probability that your return on this asset will be less than ..
McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 5.25% coupon paid semi annually (2.625% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the..
Based strictly on the calculations, which proposals should be accepted or rejected. Use the appropriate divisional discount rate. The net present value provides the answer directly while the internal rate of return must be compared to the discount ra..
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