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You own a company that competes with Old World DVD Company. Instead of selling DVDs, however, your company sells music downloads from a Web site. Things are going well now, but you know that it is only a matter of time before someone comes up with a better way to distribute music. Your company just paid a $1.91 per share dividend, and you expect to increase the dividend 12 percent next year. However, you then expect your dividend growth rate to begin going down—to 6 percent the following year, 2 percent the next year, and to -3 percent per year thereafter. Based upon these estimates, what is the value of a share of your company’s stock? Assume that the required rate of return is 12 percent.
Value of a share in $
An investor purchases a stock for $45 and a put option for $.85 with a strike price of $41. The investor also sells a call option for $.85 with a strike price of $54. What is the maximum profit and loss for this position?
You have taken a short position of 3 contracts in the Dow futures (trade $10 times the index) at a price of 16,300. The initial margin is $6,500 and the maintenance margin is $5,200 for the contract. At the time you entered the position you had equit..
You are borrowing $215,000 to purchase your new home. what is the effective cost of borrowing?
Tyler Industries stock traditionally provides a rate of return of 14.2 percent. The company just paid an annual dividend of $1.65 a share and recently announced it will commence increasing its dividends by 3.5 percent each year. For this stock to ret..
How much debt is outstanding in a firm that has calculated the present value of a perpetual tax shield to be $300,000 if the tax rate is 35% and the debt carries a 10% rate of return?
A detailed explanation and example of an enforceable contract.
Calculate the differences in rates of return between a ten year AAA corporate bond and a five year Treasury bond.
Discuss the importance of analyzing competition within an industry to better appeal to potential candidates. How can an organization use incentives to ensure it appeals to the employees it wants to hire?
New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity?
Look at Capital Budgeting as a business and operating decision across many industries.
You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.60 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $75 per share. The required return on Avondale stock is 20 percent. Suppose you ..
Analysts expect the company to grow at a rate of 3.29% indefinitely. The risk free rate is 2.92%. What should be Ranyard's current stock price?
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