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XYZ's revenues this past year were $250,000 and total costs were $150,000; and both costs and revenues have been expected to remain the same in perpetuity. XYZ is an all equity firm (i.e., it has no debt), with a return on assets of 10%, and has 100,000 shares outstanding. XYZ currently pays out all its earnings as dividends (100% payout) and has been expected to do so forever. The dividends on the basis of last year's earnings have just been paid out. Unknown to the market, a team of researchers and the President of XYZ suddenly discover that the firm can introduce a range of new products and start expanding the market and increase earnings. However, this expansion will also increase costs and the company will be unable to pay out all the earnings as dividends. The President and her financial team have come up with two growth alternatives. (I) Grow earnings at an annual rate of 5% forever, but reduce the payout to 70% forever. No other financing will be necessary apart from this plowback (or reduction in payout). (II) Grow earnings at an annual rate of 8%, but with a reduction in payout to only 40%. Again no other financing will be necessary apart from this plowback. By how much will the price per share of the firm increase (in dollars) if it adopts the right strategy of growth?
A $1,000 par value bond has an 8% coupon and pays interest annually. There are 9 years remaining until maturity. The market rate for this and similar bonds is 10%. What is the CURRENT YIELD on this bond?
Determine Company C's weighted average cost of equity, given the following data:
Compute the current value of the stock. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Common stock: 240,000 shares outstanding, selling for $64.80 per share, beta is .88 and will pay a dividend of $3.00 next year.The dividend is expected to grow by 5.3% per year indefinitely.
If you consider the debt tax shield, all the firms should have as much debt as they can, why then do we find that firms have not high levels of debt?
the state of idaho issued 2000000 of 7 coupon 20-year semiannual payment tax-exempt bonds 5 years ago. the bonds had 5
How is the levered value of the project impacted by the constant interest coverage policy?
Emery Company just paid a dividend of $2.25 per share. The company's stock is currently selling for $60 per share, and the required rate of return on Emery Company stock is 16%. What is the growth rate expected for Emery Company dividends assuming..
What are the major types of foreign exchange risks? How are these risks hedged or mitigated? What benefits do firms gain from hedging activities?
Suppose a bond with three years until maturity and an 8.5 percent annual coupon sells for $1,029. What is the interest rate for three years?
Acme has been in acquisition talks with 2 different European firms. JEL Industries is headquartered in country that is part of European Union while DBC Industries is headquartered in European country that doesn't belong to the Union and doesn't us..
Find out the expected return for Benson Industries. Find out the average cash conversion cycle for Jolly Roger Company.
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