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Suppose a company has a net income of $1,000,000 and a plowback ratio of 40%. There are 50,000 shares of stock outstanding. The company plans to increase dividends by 22% each year for the next 2 year and then apply a 2.25% growth rate to dividends each year indefinitely. The required return is 13%.
a) What will this year's dividend be?
b) What should the stock price be today?
c) What is this year's dividend yield? What is this year's capital gains yield?
d) What will the stock price be in 2 years?
e) What will the dividend yield and captial gains yield be in 2 years?
A firm will sell an asset for $75,000 in three years and the cost of producing the asset today is $36,000. If the interest rate is 12 % per year, will the firm make a profit? What is the breakeven interest rate?
At expiration, the time value of an option: If the price of an underlying asset has a standard deviation of zero:
Shinoda Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.3 percent. The current yield on these bonds is 7.65 percent. How many years do these bonds have left until they mature?
You have a portfolio with a beta of 1.59. What will be the new portfolio beta if you keep 86 percent of your money in the old portfolio and 14 percent in a stock with a beta of 0.58? (Do not round intermediate calculations and round your answer to 2 ..
Your firm is contemplating the purchase of a new $625,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $69,000 at the end of that time. You will save $255,000 before..
How much would you have to invest today to receive? a. $6,900 each year for 19 years at 9 percent?
Welch Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects is presented below: If Welch establishes its dividends from th..
The common stock and debt of Northern Sludge are valued at $60 million and $40 million, respectively. Investors currently require a 17.0% return on the common stock and a 7.0% return on the debt.
Find the following values for a lump sum assuming annual compounding: The future value of $500 invested at 8 percent for one year The future value of $500 invested at 8 percent for five years The present value of $500 to be received in one year when ..
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 $38 and the risk-free rate of interest is; 8% per annum with continuous compounding. What are the forward price and the initial value of the f..
Identify and discuss the challenges involved in collecting environmental data and information. How can a marketing manager or analyst overcome these problems?
Modern Artifacts can produce keepsakes that will be sold for $70 each. Nondepreciation fixed costs are $2,300 per year, and variable costs are $35 per unit. The initial investment of $6,000 will be depreciated straight-line over its useful life of 5 ..
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