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Texas Wildcatters Inc. (TWI) is in the business of finding and developing oil properties, then selling the successful ones to major oil companies. It is now considering a new potential field, and its geologists have developed the following data, shown in thousands of dollars. t = 0. A $400 feasibility study would be conducted at t = 0. The results of this study would determine if the company should commence drilling operations or make no further investment and abandon the project. There is an 80% probability that the feasibility study would indicate that an exploratory well should be drilled. There is a 20% probability that no further work would be done. t = 1. If the feasibility study indicates good potential, the firm would spend $1,000 at t = 1 to drill an exploratory well. The best estimate is that there is a 60% probability that the exploratory well would indicate good potential and thus that further work would be done, and a 40% probability that the outlook would look bad and the project would be abandoned. t = 2. If the exploratory well tests positive, the firm would go ahead and spend $10,000 to obtain an accurate estimate of the amount of oil in the field at t = 2. t = 3. If the full drilling program is carried out, there is a 50% probability of finding a lot of oil and receiving a $25,000 cash inflow at t = 3, and a 50% probability of finding less oil and then only receiving a $10,000 inflow. Since the project is considered to be quite risky, a 19.5% cost of capital is used. What is the project's expected NPV, in thousands of dollars? 1. $373.65 2. $398.23 3. $481.81 4. $570.31 5. $491.64
The National Motor Corporations last dividend was $1.25 and the directors expect to maintain the historic 4 percent yearly rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7 percent.
You have the following data on Target and Wal-Mart: Using Target as a comparable, The current value of Wal-Mart is about $54 per share. Estimate compare to the current price.
Calculate the value of stock under constant growth model with required return and declining growth rate
Suppose that Wal-Mart changes its capital structure so that its market value weight of debt to capital increases to 20 percent, and its after-tax interest rate on debt at this new leverage level is 4 percent.
Williams and Westrich stock is currently selling for $15.25 each share, and the dividend is expected to continue at 92¢ per share. Management expects the stock to grow at 8 percent.
If the stockholders of Arakawa require 12% return on their investment, find the price of the stock now. What is the price after 12 years?
Use numbers and show me how a stock split affects the balance sheet of a firm.
Your tax rate is 32 percent and you require a 13 percent return on your investment. What bid price per carton should you submit?
The prices for the Guns and Hoses Company for the first quarter of 2005 are given below. Calculate the holding period return for February.
USD price of Big Mac in South Africa and the US are $4.50 and $3.90 respectively. The price of Big Mac in South African Rand is also 37.05. PPP implied exchange rate of South African Rand is 9.50 SAR per dollar.
Last year Productions pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $0.40 a share for two years commencing four years from today.
IBM just paid a $2 dividend. The required rate of return for IBM stock is 22 percent. If a value of a share of IBM is expected to be $82.1516 at the end of year 2, Calculate IBM's expected growth rate?
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