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Suppose that you are attempting to raise money for new business venture. You estimate that your business will generate $10,000 of free-cash-flow each month in perpetuity. Say Mark Cuban offers you $2,000,000 today to help you make the initial investment but, requires that you sell him 50% of the business. Assuming your firm is all equity financed, what WACC is corresponds to Mark’s valuation?
Tri-County Inc. pays an annual common stock dividend of $1.80 per share. The dividend has shown a constant growth rate over the past 5 years from $1.10 to its present level. This growth trend is expected to continue. The company's dividend payout rat..
The case where all parties to a transaction or contract do not have the same information is a world of ___ information. The FED can increase the money supply by _____.
Portfolio Return Year-to-date, Company O had earned a -2.80 percent return. During the same time period, Company V earned 8.7 percent and Company M earned 6.95 percent. If you have a portfolio made up of 10 percent Company O, 20 percent Company V, an..
Schalheim Sisters Inc. has always paid out all of its earnings as dividends, hence the firm has no retained earnings. This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, its target capi..
Which of the following is NOT a characteristic of money market instruments?
Consider an option on a dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. What is the price of the opti..
Consider an infinitely repeated Cournot duopoly with discount factor δ 0, and inverse demand functions p(Q)=a-bQ, with a>c and b>0. Find the condition on the discount factor,δ , for which the two firms could successfully collude over the monopoly ou..
Consider the following information on Stocks I and II: Rate of Return if State Occurs State of Economy / Probability of State of Economy / Stock I / Stock II. The standard deviation on Stock I's expected return Is ? percent and the Stock I beta is ?...
First, create a butterfly spread strategy using these options. (1) $190 call priced at $11.51 , (2) $200 call priced at $8.22 and (3) $210 call priced at $7.55. Calculate the rate of return (in %), when the underlying stock price becomes $200. (margi..
The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $70 per unit and fixed costs per year will ..
You purchased one GBK, Inc. 8 percent coupon bond one year ago for $1,090. The bond makes annual payments and matures four years from now. You sell the bond today when the required return is 4 percent. The inflation rate was 1.4 percent over the past..
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon r..
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