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A7X Corp. just paid a dividend of $2.70 per share. The dividends are expected to grow at 19 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Recalculate the NPV assuming the machine press can only be sold for $45,000 at the end of year four. Does this change have an impact on their decision?
The firm has a 75% chance if it invests -$1,500 a return of $500 for 7-years, and a 25% chance of returning $25 for 7-years. Based on the above data, what is the project's net present value?
The dividend exclusion for corporations receiving dividends from another corporation has resulted in
Tool Makers, Inc. uses tool and die machines to produce equipment for other firms. The initial cost of one customized tool and die machine is $850,000. This machine costs $10,000 a year (after-tax) to operate. Each machine has a life of 3 years befor..
The security market line (SML) relates risk to return, for a given set of market conditions. If risk aversion increases, which of the following would most likely occur? A) The market risk premium would increase. B) Beta would increase. C) The slope o..
Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 36% of the company’s present value, and you believe that at this capital structure the company’s d..
An investment promises to pay an annuity of $150 monthly payments for seven years, but the payments do not start now. The first payment will be received 3 years from today. What is the maximum you will be willing to pay for this investment if your re..
firm u is an all equity firm and has a market value of 500000 and ebit of 100000. firm l is identical in all respects
A contractor estimates that maintenance on a new piece of equipment will be $275 for the first month and it will increase by 0.5% each month afterwards. However, the contractor is offered a service contract that would maintain the equipment for a tot..
A firm is evaluating a project which will cost $10,269 today and provide cash flows in years 1, 2, and 3 of $7,560, $3,286, $3,268 and, respectively. The firm’s discount rate is 8%? (Assume CFs is received at the end of each year). What is the discou..
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.56 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
Calculate the following values for a project that requires an initial investment of $38,370 and has equal annual cash inflows of $10,000 each year for the next 8 years. Assume a cost of capital of 14%. You must show your work for full credit.
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