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You buy a share of The Ludwig Corporation stock for $21.40. You expect it to pay dividends of $1.07, $1.1449, and $1.2250 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $26.22 at the end of 3 years. a. Calculate the growth rate in dividends. b. Calculate the expected dividend yield. c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock’s expected total rate of return?
You are the manager of a large crude-oil refinery. As part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. If the company's cost of capital i..
An investor is considering a two-asset portfolio. Stock A has an exected return of $4.50 per share with a standard deviation of $1.00, while stock B has an expected return of $3.75 with a standard deviation of $.75. The covariance between the two sto..
A large cow barn will cost $150,000 to build today and you figure it will add $18,000 per year to your after-tax cash flows for the next ten years. If the salvage value of the building is 50% after ten years and the cost of capital is 7%, what is the..
Suppose you have a $1,000 face value bond with 12 years to maturity, a coupon rate of 6% and a yield to maturity of 8%. If the bond makes semiannual payments, what is its price today? Compute the value of Acme Common Stock if the next dividend is exp..
Discuss the performance and financial position of the three companies and in your discussion highlight the possible causes of the differences between the three companies.
A bond has the following terms: Annual interest 100 , Term 15 Years, Principal $1000 a. What is the current price of the bond if comparable yields are 7 percent? b. What are the current yield and yield to maturity given the price of the bond in the p..
You just started working full-time, earning $100,000 per year. Your goal is to have $5 million in your 401(k) plan by your 61st birthday (i.e., 40 years from today). Assume 3% inflation per year.
On February 22, 2009, your company bought office furniture for $35,000. According to the accounting rules everyone must play by, what would be the dollar value of depreciation your company could take in the following years assuming they use MACRS and..
You have just been hired as a financial analyst for Basel Industries. Unfortunately, company headquarters (where all of the firm's records are kept) has been destroyed by fire. So, your first job will be to recreate the firm's cash flow statement for..
Assume that your required rate of return is 12 percent and you are given the following stream of cash flows: If payments are made at the end of each period, what is the present value of the cash flow stream?
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $25,000 per month for 25 years, with the first payment received 30 years and 1 month from now. If he can..
The current spot exchange rate between the dollar and the Swiss franc (CHF) is $0.61/CHF. What is the expected future spot rate for the CHF in 3 years?
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