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Suppose an investor is considering the purchase of a share of the Utah Mining Company. The stock will pay a $ 3 dividend a year from today, This dividend is expected to grow at 10% per year (g=10%) for the foreseeable future. The investor thinks that the required return on this stock is 15%, given her assessment of Utah Mining’s risk. What is the price of a share of Utah Mining Company’s stock? If g= 12.5%, what is its stock price?
Given a 35% corporate tax rate, for every $1 in new permanent debt that the firm issues, the value of the firm increases by $0.65. The firm’s marginal tax rate may fluctuate due to changes in the tax code and changes in the firm’s income bracket. Man..
The Reynolds Corporation buys from its suppliers on terms of 3/17, net 45. Reynolds has not been utilizing the discounts offered and has been taking 45 days to pay its bills. Calculate the cost of not taking a cash discount.
A group of private investors borrowed $30 million to build 300 new luxury apartments near a large university. the money was borrowed at 6% annual interest, and the loan is to be repaid in equal annual amounts( principal and interest) over a 40-year p..
Suppose that the spot price of the Canadian dollar is U.S. $.75 and that the exchange rate has a variance of 6% per year. The risk free rates are 5% and 2% per year, compounded continuously in Canada and the U.S., respectively. Calculate the value o..
What is the accumulated sum of the following stream of payments? $21,509 every year at the beginning of the year for 15 years, at 7.84 percent compounded annually.
Six years ago the Singleton Company issued 28-year bonds with a 13% annual coupon rate at their $1,000 par value. The bonds had a 8% call premium, with 5 years of call protection. Today Singleton called the bonds. Compute the realized rate of return ..
The Borrow & Build Inc. has an outstanding bond with the par value of $1,000.00, 10 years to maturity and annual coupon rate of 9%. The required rate of return on this particular class of bonds is 8%. What is maximum price you are willing to pay for ..
A bond has a $1,000 par value, 20 years to maturity, a 6.5% semi-annual coupon, and sells for $1,037.25. Find the yield to maturity. Find the current yield.
How much money must initially be deposited into the account to provide 20 end-of year with drawls if the with drawl is $1750 and each subsequent with drawl increases by $250? The accounts earns interest at the rate of 7.25% per year, compounded conti..
Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $19, $10, $5.2 and $2.4. Afterwards, the company pledges to maintain a constant 3 percent growth rate in dividends forever. If the required return on the s..
You can buy a $50 savings bond today for $25 and redeem the bond in 10 years for its full face value of $50. You could also put your money in a money market account that pays 7% interest per year. Which option is better, assuming they are of equal ri..
Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to..
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