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Question 1: Ergon Inc. expects to have £125 million in earnings at the end of the year and earnings are expected to grow at 6% annually.The firm does not pay any dividends, but it intends to use 25% of its earnings for stock repurchases. Ergon's cost of equity is 15% and it has 25 million shares outstanding. Calculate Ergon's stock price.
Question 2: ABC Corporation expects to have earnings per share of £6 next year. Rather than reinvest these earnings and grow, the firm plans to pay out all of its earnings as a dividend. With these expectations, of no growth, ABC's current share price is £60. Suppose ABC could cut its dividend payout rate to 75% next year and use the retained earnings to open new stores. The return on its investment in these stores is expected to be 12%. Assuming its equity cost of capital and the new growth rate remain unchanged, what effect would this new policy have on ABC's stock price?
Question 3: You are the owner of a firm that currently generates revenues of £1 million per year. Next year, revenues will either decrease by 8% with 60% probability or increase by 10% with 40% probability and then stay at that level for as long as you run the business. You own the firm outright. Also, you have annual costs of £700,000. If you decide to shut down the firm the cost is zero. In that case, you can always sell the firm for £600,000. What is the business worth today if the cost of capital is 12%?
One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a significant decrease in inventory turnover.
(Cost of factoring) MDM Inc. Is considering factoring its receivables. The firm has credit sales of $450,000 per month and has an average receivables balance of $900,000 with 60-day credit terms. The factor has offered to extend credit equal to..
What are the main concerns that people have about immigration today? Are these concerns similar to those that Americans held in the past?
Why do rapidly growing firms generally pay no dividends?
Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.
describe a swap contract. how are swaps typically used by
suppose an mnc is considering investing in bolivia. will an overall assessment of bolivias country risk suffice to
stock a has a beta of 0.8 and stock b has a beta of 1.2. 50 of portfolio p is invested in stock a and 50 is invested in
For both the Standard and the Deluxe machines, calculate the payback period.
Sam's Corporation expects to pay a dividend of $6 per share at the end of year one, $9 per share at the end of year two, and then be sold for $136 per share at the end of year two.
Regarding of your work above, suppose that D0, which was just paid, = $1.00, D1= $1.20, D2 = = $1.40, D3 = $1.55, D4 = $2.00, D5 = $2.13, D6 = $2.27, and P3 = $80.00.
1. In which performance technique are managers given three performance rating scales per dimension and asked to indicate whether the employee's performance is above (+), at (0), or below (-) the statements?
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