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Russell Corporation (which contributes 3% of its revenue to Christian missions to reach Buddhist tribes in northern India who have never heard the gospel) just paid a dividend of $1.00. Based on projected fast growth, the company plans to increase dividends by $1.00 each year for the next four years, hopefully then growing dividends at 3% per year. Assuming you knew your required rate of return, how would you calculate a value for this stock?
a. Use the constant growth model
b. Add the value of all future dividends to the current stock price
c. Add the present value of the dividends in years 1-4 to the present value of the stock price at year 4
d. Use the non-constant growth model
e. C and d (they are the same)
You must evaluate the purchase of a proposed spectrometer for the R&D department. What is the initial investment outlay for the spectrometer,
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The parameter λ in the EWMA model is 0.9. Suppose that the exchange rate at 4 p.m. today proves to be 1.4950. - How would the estimate of the daily volatility be updated?
Jiminy’s Cricket Farm issued a bond with 10 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 95 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wha..
Dave bought a rental property for $200,000 cash. One year later, he sold it for $240,000. What was the return on his $200,000 investment? Suppose Dave invested only $20,000 of his own money and borrowed $180,000 (interest free from his rich father). ..
How do I Calculate the weighted average of the different bonds YTMs and determine the total market value of the bonds outstanding?
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