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1. Maxwell Electromagnetics just paid its first annual dividend of $.41 a share. The firm plans to increase the dividend by 5.3 percent per year indefinitely. What is the firm's cost of equity (in percents) if the current stock price is $19 a share?
2. The 10.9 percent preferred stock of Avogadro Numerics is selling for $46 a share. What is the firm's cost of preferred stock if the tax rate is 33.7 percent and the par value per share is $100?
3. If you are offered $20,000 now or $30,000 in ten years' time, which should you accept, and why, given a fixed annual interest rate of 4.5% (assuming you would invest the $20,000)?
Identify a factor that does not affect cash inflows
The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert synthesis gas (i.e., a mixture of hydrogen and carbon monoxide) into liquid with some gaseous hydrocarbons. If Congress appropriates $27 billion to support the F-T process ..
Jimmy wants to purchase a new set of bucket seats for his van. He has bad credit, so he finds a place that will sell him the seats via an add-on loan. The seats cost $900 total. Jimmy in willing to pay up to $90 per month for one year for these seats..
A project will generate before tax cost savings of $110,000 per year, for five years, create additional depreciation expense of $73,000 per year, and result in the following net working capital needs: Time: 0 1 2 ... 4 5 Accts Rec 100,000 150,000 150..
To forecast future cash flows sometimes companies use top-down and sometimes bottom-up approach (and sometimes both)? What are the advantages and disadvantage of each of them? In forecasting your company (Walmart Store, Inc.) cash flow in earlier dis..
assume that amazon has a stock-option plan for top management. each stock option represents the right to purchase a
1) The nominal rate of Bank A is 8% and interests are compounded monthly, what is its effective rate? The effective rate of Bank B is 9.31% and interests are compounded four times a year, what is its nominal rate? Suppose the present value of a 2 yea..
A firm is considering purchasing a factory for $1 million. The factory will yield a cash flow of CF1 = $200,000 in one year, a cash flow of CF2 = $300,000 in two years, and then will be sold for CF3 = $900,000 in three years. The appropriate interest..
Stock R has a beta of 2.1, Stock S has a beta of 0.60, the expected rate of return on an average stock is 9%, and the risk-free rate is 5%. By how much does the required return on the riskier stock exceed the required return on the riskier stock exce..
Exactly five years ago, AAA Corporation issued 20-year bonds with a $1,000 face value. These bonds pay $50 in coupon payment every six months. The bonds currently sell for $850. Due to additional financing needs, the firm has decided to issue new bon..
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $8.4 milli..
Bayou Okra Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the..
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