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a) Powell Industries Ltd (PIL), based in St. Andrew, has secured a new contract making them the sole supplier of commercial oxygen in Jamaica for the next three years. It is expected that their profitability will increase significantly until the market opens to their rivals. Profits and dividends are expected to grow by 25% in the first year, 18% in the second year and 12% in the third year after which the long-term dividend growth rate is expected to be 3.5%. PIL's cost of capital is 22% and their most recent dividend was $1.75.
i) Calculate PIL's share price today (P0).
ii) Calculate the expected share price two years from today (P2).
iii) Calculate the dividend yield for year 3.
b) Online Solutions Limited (OSL) last paid a dividend of $2.40 and the stock has a beta of 1.45. Dividends are expected to grow at a constant rate of 3.2% indefinitely. What is the equilibrium stock price for OSL given that T-Bills are currently trading at 4.25% and the market risk premium is 7.3%?
c) Preferred shares for Face to Face Limited have a par value of $150 and pay dividends at a rate of 4%. Shareholders currently require a return of 9.3% for investing in these shares. Calculate the price of these preferred shares.
The "Spirit Bear" or Kermode bear is a pure white mutant of the American black bear that is found on Princess Royal Island off the central BC coast.
Bankers' Rule was used for the interest calculation. How much did the company loan their CEO?
ABC Company's Inventory Turnover Ratio (COGS basis) is 10.8 and is expected to remain constant. If the cost of goods solds is expected to change.
Compute the value of Bart's Moving Company bonds if investors' required rate of return is 9.5%
the corrado corporation expects an ebit of 5000 every year forever. corrado currently has no debt and its cost of
What is the immediate dilution potential for this new stock issue? If the stock has a P/E ratio of 23 immediately after the offering, what will the stock price be? Should the founding stockholders be pleased with the $40 they receive for their share..
a) Is the executive correct in predicting that ROE will fall? b)How important should changes in ROE be in this decision?
Page 73 provides concerns of the Treasury Staff that WACC (the discount rate) includes the expected rate of inflation at 3% per year. Do the numbers in the projection (revenues, expenses, and cash flows) include inflation?
For each company, compute the following ratios: a. Current. b. Receivables turnover. c. Average collection period. d. Inventory turnover. 2.Compare the liquidity, solvency and profitability of the two companies.
Suppose a change in expectations regarding future U.S. inflation causes the expected future spot rate to decline to $1.52:£1. What should happen to the U.S. interest rate?
If the estimates of remaining cash flows are revised based on the first year's experience, at what level of expected cash flows does it make sense to abandon.
What are the implications of behavioral aspects of service production processes?
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