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1. Given a current dividend of 3, a required return of 10% and a dividend growth rate of 2% forever, compute the current value of this stock.
38.25
37.5
30
150
2. A firm has a debt-equity ratio of 1.0. The required return on the firm’s assets is 11.1% and the pre-tax cost of debt is 4.1%. Ignore taxes. What is the firm’s cost of equity?
15.3%
18.1%
23.1%
21.7%
Winters Inc. management estimates that the company will generate free cash flows from the firm (FCFF) of $12.5 million, $16.8 million and $19.7 million, respectively, over the next three years. After that, FCFF will grow at a constant five percent pe..
Your communications firm has been hired to develop a presentation targeted to High Net Worth clients. Why it’s important that everyone have a financial plan.
If the dividend is expected to grow at an annual rate of 5% and the required return is 15%, what is the intrinsic value of the share?
Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues.
Calculate the Earnings after tax for both firms. Which firm has the higher after-tax earnings? Which firm appears to have the higher cash flow?
Do problem 1 over again, this time assuming more realistically that a swap bank is involved as an intermediary. Assume the swap bank is quoting five-year dollar interest rate swaps at 10.7% - 10.8% against LIBOR flat.
The loans require monthly payments and are fully amortizing. What is the effective (annual) cost of the two loans in percent?
A firm estimates sales of $150,000 in December, $175,000 in January; $125,000 in February, $200,000 in March, $250,000 in April; $180,000 in May; and $200,000 in June. November sales were $125,000. Prepare the cash budget for January through April. W..
Great Docs, a three-physician practice with two office sites, is considering whether to buy or lease a new computer system. Currently they own a low-tech (and low-cost) information system. Summarize the costs to the practice of owning a system (per D..
What is the cost of goods sold?
A 1-year gold futures contract is selling for $1,645. Spot gold prices are $1,592 and the 1-year risk-free rate is 3%. Based on the above data, which of the following set of transactions will yield positive riskless arbitrage profits?
How many rights must be submitted to acquire one new share?
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