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Sinclair Pharmaceuticals, a small drug company, develops a vaccine that will cure the common cold. It is expected that Sinclair Pharmaceuticals will experience extremely high growth over the next three years and will reinvest all of its earnings in expanding the company over this time. Earnings were $1.20 per share before the development of the vaccine and are expected to grow by 40% per year for the next three years. After this time, it is expected growth will drop to 5% and stay there for the expected future. Four years from now Sinclair will pay dividends that are 75% of its earnings. If its equity cost of capital is 10%, what is the value of a share of Sinclair Pharmaceuticals today?
Tangier Manufacturing's common stock has a beta of 1.8. If the expected risk free return is 5% and the expected return on the market is 16%, what is the expected return on Tangier's stock?
Discuss and explain the relationship between bond prices and interest rates and what impact do changing interest rates have on the price of long-term bonds versus short-term bonds?
The firm has a beta of 1.48 and a tax rate of 30 percent. What is the weighted average cost of capital?
Which of the following bond types would describe unsecured obligations that depend on the general credit strength of the corporation?
An investment that costs $50,000 will return $15,000 operating cash flows per year for five years. Determine the net present value of the investment if the required rate of return is 14 percent. Should the investment be undertaken?
Explain why fixed differential rate is much larger than floating differential rate in swap. For example, the fixed might be 2%, but the floating differential rate is only 0.3%
Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm's FCF fo..
After reviewing all cost cutting measures I anticipate I could cut back and save approximately $15000 a year if I put those measures into practice.
Explain What is the reasonable cost of capital for average and high and low risk projects Suppose a firm estimates its WACC to be 10 %.
Describe the effect on income when the over-or underabsorbed overhead calculated in (c) is written off to cost of goods sold.
NHS Co. issued $350,000 of 10-year bonds payable on January 1. NHS pays interest each January 1 and July 1 and amortizes any discount or premium by the straight-line method. NHS issued the bonds at a price of $430,000 when the market rate was belo..
The device has an estimated Year 5 salvage value of $60,000. What level of pretax cost savings do we require for this project to be profitable?
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