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Assuming the company continues its current growth rate, what is the value per share of the company's stock? 2. To verify their calculations, Ragan, Inc. has hired an equity analyst familiar with the HVAC industry who has examined Ragan Inc.'s financial statements as well as those of its competitors. Although Ragan, Inc. currently has a technological advantage, the consultant's research indicates that other companies are investigating methods to improve efficiency and the consultant believes that Ragan's technological advantage will only last for the next five years. After that period, the company's growth will likely slow to the industry growth average. Additionally, the consultant believes that the required return used by Ragan, Inc. is too high and that the average required return rate is more appropriate. Under this growth rate assumption, what is your estimate of the stock price? 3. What is the industry price-earnings ratio? What is the price-earnings ratio for Ragan, Inc.? Is this the relationship you would expect between the ratios? Why or why not? 4. Carrington and Genevieve are unsure how to interpret the price-earnings ratio but have come up with the following expression: P0 = 1 - b -- ------------ E1 R - (ROE x b) Beginning with the constant dividend growth model, verify this result. What does this expression imply about the relationship between the dividend payout ratio, the required return on the stock, and the company's ROE? 5. Assume the company's growth rate slows to the industry average in five years. What future return on equity does this imply, assuming a constant payout ratio? 6. After discussing the stock value with the consultant, Genevieve and Carrington agree that they would like to increase the value of the company stock. Like many small business owners, they would like to retain control of the company, but they do not want to sell stock to outside investors. They also feel that the company's debt is at a manageable level and do not want to borrow more money. How can they increase the price of the stock? Are there any conditions under which such an action would not increase the stock price? Explain
The bonds have a face value of $1,000 and an 12% coupon rate, paid semiannually. The price of the bonds is $850. The bonds are callable in 5 years at a call price of $1,050.
In the Rational Choice paradigm, what conditions must a person's preferences meet in order for us to consider them a rational person
A loan is offered with monthly payments and a 7.50 percent APR. What's the loan's effective annual rate (EAR)
If Sarah can earn 7 percent annually for the next 26 years, the amount of money she will have to invest today is. If Sarah earned an annual return of 17 percent, how soon could she then retire.
You have an investment with 16 quarterly cash flows of $2000. The first payment is 3 months from today. If the EAR is 9%, what is the present value of this investment
Your annual savings of $12,225 are deposited into Account # 3, which earns you 8.39% compounded quarterly for 5 years. How much will you have in Account #3 10 years from now
You own 300 shares of stock which dropped drastically in value today down to $13.50 a share. You have a margin loan of $2,880. What is the amount of your margin call if the maintenance margin is 40 percent
Lexus. is considering an investment of $383,000 in an asset with an economiclife of 5 years. The firm estimates that the nominalannual cash revenuesand expenses at the end of the first year will be $263,000 and $88,000
You have two choices: the Scion xA, which will cost $22,500 to purchase and which will have OCF of -$2,900 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius,
Miiler Manufacturing has 4 million shares of commonstock outstanding. The currentshare price is $76, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding.
Here and Gone, Inc., has sales of $19.9 million, total assets of $14.9 million, and total debt of $5.7 million. Assume the profit margin is 12 percent.
Calculate the present value of a perpetuity that makes a payment of $1,000,000 every 6 months, with the next payment being made in exactly 6 months from now.
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