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Constant growth
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75) has a beta of 0.9. The risk-free rate is 3.1%, and the market risk premium is 5.5%. Keller currently sells for $33.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Round your answer to two decimal places.
A proposed cost-saving device has an installed cost of $640,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $46,000, the margi..
A company has a zero-coupon bond outstanding, with face value 1,000 and a 3 year maturity. The bond is risky with a beta of 0.7. The risk free rate is 2% and the market risk premium is 6%. There are two equally likely scenarios at maturity:
In January 2015, Yahoo announced a plan to spin off tax-free its nearly $40 billion of holdings in Alibaba. Discuss advantages and disadvantages of a spin-off from the standpoints of both the company and its investors.
From the Federal Reserve Bank of St Louis you collect the following data: In real terms, in what year was crude oil was more expensive? Show your calculations and provide a brief explanation.
A company wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. the firms wishes to maintain a capital structure of 25% debt, 15% preferred stock, and 60% common stock. Can someone please explain me how to s..
If a corporation were to choose between issuing a debenture, a mortgage bond, or a subordinated debenture, everything else equal, which would sell for the greatest price?
A florist is buying a number of motorcycles to expand its delivery service. These will cost $87,000, but are expected to increase profits by $3000 per month over the next four years. What is the payback period in this case?
What qualitative considerations are important for a company seeking to raise capital? Answer this by considering the effect of leverage in your response. Specifically, what expected effects will additional leverage have on a company’s decision to acc..
Explain the relationship between financial information and the financial condition of an organization. In other words, why are financial ratios and financial statements used to evaluate the health of an organization?
In 2014, stock ABC pays $0.80 per share quarterly dividend and the dividend was $0.50 per share in 2008. The growth rate is 5.0%. Find the beta for stock ABC. Find the current interest rate on a 6-month treasury bill. Calculate the expected return fo..
Track Software paid $5,000 in dividends in 2015. Suppose that an investor approached Stanley about buying 100% of his firm. If this investor believed that by owning the company he could extract $5,000 per year in cash from the company in perpetuity, ..
Ghost Rider Corporation has bonds on the market with 16 years to maturity, a YTM of 7 percent, and a current price of $968. What must the coupon rate be on the company’s bonds?
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