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Using DFC method company ABC earned pretax operating income of $750,000. Income has grown 2% annually during the last 5 years, and is expected to continue growing at that rate for the next 2 years. Net operating working capital increased by $60,000 during the current year and current year capital spending on long-lived assets exceeded depreciation by $75,000. working capital and the excess of capital spending over depreciation are projected to grow at the same rate as operating income. Subsequent to the second year, you believe the pretax operating income growth rate will increase to 3% per year and remain at that level into the future. The 10-year Treasury bond rate is 2.5%, the equity risk premium is 5.5%, and the marginal federal, state, and local tax rate is 35%. Abc's beta and its target debt-to-equity ratio are 1.74 and 0.67, respectively. Its pretax cost of borrowing, based on its recent borrowing activities, is 9%. Calculate the cost of equity and ABC'S target capital structure weights.
The two primary factors that affect interest rates on debt securities are risk and inflation. Explain the role of each factor.
A fixed-income portfolio manager sets a minimum acceptable rate of return on the bond portfolio at 5.5% per year over the next 3 years.
If we input a positive PV in our calculator, we get a negative FV if that is what we are solving for. The reverse it true as well. Put in a positive, and the answer is negative. This is true of all financial calculators and is referred to as the ____..
What is the NPV of this project if the discount rate is infinite?
You are creating a business plan to add an outpatient lab located on Local Hospital campus. This plan is being submitted to senior leadership of Local Hospital for consideration. How many services will be offered to produce the revenue? How much labo..
For example, about the human factors in the budget, the example must be real and must about listed company.
The risk-free rate of return is 6%, the required rate of return on the market is 10%, and High-Flyer stock has a beta coefficient of 1.2. If the dividend per share expected during the coming year, D1, is $2.40 and g = 6%, at what price should a share..
Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year. An emission reduction filter will cost $75,000 and have an expected life of 5 years. Carlisle’s MARR is 10 %/year. What is t..
The Goode and Cooke Company produces several models of frying pans. There is little difference in the production time required for the various models; the plant is designed to produce 160 frying pans per eight-hour shift, and there are two shifts per..
If you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto's cost of common equity?
You are planning to save for retirement over the next 30 years. To do this, you will invest $750 a month in a stock account and $250 a month in a bond account. The return of the stock account is expected to be 11 percent, and the bond account will pa..
Calculate the net profit or loss from BUYING a CALL option on Taz if at the time of expiration the price per share of Taz is $53.50.
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