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1.We typically claim that stock prices are equal to the present value of their payoffs. What dynamics in the real world cause this to happen?A. Market-makers are obligated to post prices equal to present values.B. Arbitrage in financial markets.C. Government regulations force prices to be equal to present values.D. None of the above statements are correct.2.Consider a bond with face value of $2,000 which pays a 4% annual coupon (this is the interest payment). The bond matures in 12 years. The current yield on bonds with similar characteristics is 3%. Assume that the first interest payment is one year from now - calculate the current price of the bond.3.The market expects the dividends paid by Company X to grow at a constant rate equal to g. The current ex-dividend price of the stock is $40. The value of the first dividend to be paid next period is $1.20 and the discount rate is 5%. What is the growth rate, g, of the stock?4.Consider a case of perfect capital markets without frictions or taxes. In addition, suppose that proficient arbitrageurs are active in this market, so that all arbitrage opportunities have been taken away. Company Y's stock currently trades at $12 per share. Tomorrow, it will pay a dividend of $3. What is the ex-dividend price of the stock?5.Calculate the market capitalization rate for a firm that has no growth opportunities and pays all earnings out in the form of dividend payments. Analysts expect the firm's earnings to stay constant going forward, at $5 per share. The current stock price of the firm is $60.6.Analysts expect Company Z's dividends to grow at a constant rate of 5% per year. The firm is just about to pay a dividend amount equal to $10. Let the discount rate be 8% per year. What is the current stock price?7.The Giraffe Corporation pays dividends on an annual frequency. One year from now the firm will pay its next dividend, which market analysts expect to be $10. The analysts expect that the dividend will grow at g1 = 20% for 3 years, after which it will grow at g2 = 3% in perpetuity. The market capitalization rate for the firm is 6% - what is the current stock price?
What are some of the common barriers to entry for a firm entering a new country for business? How does this vary from country to country?
The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31, 2008.
Calculation of operating cash flows and What was Senbet's net operating income and What was Senbet's net income
To support its future growth, the firm plans to raise some debt from creditors while keeping its debt-equity ratio unchanged. What maximum growth rate can Abbai achieve?
A company has an expected dividend next year of $1.20 each share, a zero growth rate of dividends, and a required return of 10%. The value of a share of the company's common stock;
1. Why is health care more costly in the United States than in other rich countries? 2. How do high health care costs hurt the United States? 3. How is your health insurance likely to change in the next few years?
Mary is going to receive a 34-year annuity of $8,900. Nancy is going to receive a perpetuity of $8,900. If the appropriate interest rate is 12 percent, how much more is Nancy's cash flow worth?
Flotation costs of $30 per bond will be incurred in the process (which implies that f = 2.97%, or 0.0297 in decimal form) and the firm is in a 40% tax bracket.
221 million computer and video games were trade in 2002- nearly two games for every United State household. 60% of Americans age 6 or older about 145 million people play computer and video games.
Determine the abnormal rate of return for Stock A during period t using only the aggregate market return and ignore differential systematic risk.
Firms HD and LD are identical except for their use of debt and the interest rates they pay--HD has more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will HD's ROE be versus that of LD, i.e...
Assume that earnings and dividends are expected to grow at 7.5% in perpetuity. What rate of return are investors expecting?
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