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Universal Utilities (U2) applies the low regular dividend plus extras policy when determining how much of its income will be paid out as dividends each year. U2’s policy states that the minimum dividend that will be paid each year is $0.50 per share. But, when net income is greater than $600,000, the total dividend will be increased by 25 percent of the amount that exceeds $600,000. The firm currently has 100,000 shares of stock outstanding. What will be the dividend per share if U2 earns (a) $760,000 and (b) $580,000?
A firm has a capital structure with $100 million in equity and $100 million of debt. The cost of equity capital is 14% and the pretax cost of debt is 8%. If the marginal tax rate of the firm is 30%, compute the weighted average cost of capital of the..
Assume that on January 27, 2016, using news from any source you instruct your broker to take either a Long or a Short position in two (2) June (or July) futures contracts of a specific commodity traded on GLOBEX. Examples are Corn, Crude Oil, Live ca..
Shafer Corporation issued callable bonds. The bonds are most likely to be called if __________
Assume both portfolios A and B are well diversified, that E(rA) = 12.4% and E(rB) = 13.2%. If the economy has only one factor, and βA = 1 while βB = 1.1, What must be the risk-free rate?
Explain if the source of cash sustainable, and list any outstanding variances you have noticed below:3-4 variances required and now in the space provided, list the corrective measures you would implement and why.
Colin’s grandparents want to make a gift of $50,000 towards his college education fund in 12 years. How much money would they have to deposit today in an account that accrues interest monthly if the rate quoted by the bank is 6 percent?
You are following a contingent immunization policy with your bond portfolio. The targeted minimum annual return is 4 percent annual return for 5 years. Portfolio value is $300 million. The current interest rate is 5 percent. How much money you can lo..
A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a “teaser” rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite ra..
Cream and Crimson Foods has a target capital structure of calling for 40.00 percent debt, 5.00 percent preferred stock, and 55.00 percent common equity (retained earnings plus common stock). Its before-tax cost of debt is 10.00 percent. The tax rate ..
Golden Inc. is considering shifting its capital structure by substituting debt in the capital structure for common stock. At the debt ratio of 30%, the firm estimates that te average earnings per share (EPS) would be $3.12 and the standard deviation ..
You are considering buying a house for $200,000. You have $40,000 in your bank account which pays 1% APR compounded monthly. If you contribute 10% of the price of the house as a down payment, the terms of your mortgage will be an original balance of ..
A project that provides annual cash flows of $16,900 for eight years costs $75,000 today. What is the NPV for the project if the required return is 7 percent? At what discount rate would you be indifferent between accepting the project and rejecting ..
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