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ABC Corporation has just made its earnings announcement. Net income for the previous year was $12,000,000. The corporation had 2,500,000 shares outstanding. The dividend payout ratio for the year was 35% It is expected that the net income for ABC Corporation will be growing at a rate of 9% per year for the next three years. During these three years, the corporation will have a retention ratio of 55%. Starting the fourth year, ABC Corporation intends to adopt the residual dividend approach and is estimated to experience a constant growth rate of 5% per year, in perpetuity. The company has a planned capital expenditure in the amount of $5,000,000 in the fourth year, and this will be growing by 5% per year as well. The debt-to-equity ratio and the applicable tax rate are expected to remain at 25% and 30%, respectively, throughout the foreseeable future. The pre-tax cost of debt is 3.5%, the risk-free rate is 1%, the beta of the stock is 1.1. and the expected market return is 10%. Calculate the current intrinsic value of ABC Corporation. Show your work.
Galehouse Gas Stations Inc. expects sales to increase from $1,660,000 to $1,860,000 next year. Galehouse believes that net assets (Assets - Liabilities)
Impact of Liquidity Premium on Forward Rate: - Explain how consideration of a liquidity premium affects the estimate of a forward interest rate.
Financial markets assignment
Explain how WorldCom showed higher profits in the current period by inaccurately classifying expenses as assets. How would this technique affect the profits of future periods?
Justify the rationale for the intervention of government in the market process in the U.S.
Explain what services are provided by private industry. Explain the main provisions of the PPP contract.
What is the variance and standard deviation of the return of the new portfolio if the percentage of wealth in the risk-free asset is 25%? What are the portfolio weights of the four assets in the new portfolio?
If the tax rate is 27%, what is the amount of operating cash flow (OCF) each year? Answer to the nearest dollar, for example 102.
What role do financial markets play in our economy? What are primary and secondary markets? What relationship exists between financial institutions and financial markets?
Find out the expected EPS under both financing options at the given EBIT levels of Rs. 2 crores and Rs. 7.5 crores. What should be choice of the company
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 6 years ago. The bond currently sells for 90 percent of its face value. The book value of the debt issue is $20 million. The company's tax rate is 34 percent, and the bond has a YT..
1.What is correlation and when would a researcher be interested in determining the correlation among two or more variables?
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