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1) Preferred Stock Valuation
Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return (assume the market is in equilibrium with the required return equal to the expected return)?
2) Constant Growth Valuation
Crisp Cookware’s common stock is expected to pay a dividend of $3 a share at the end of this year (D1=$3.0); ots beta is 0.8; the risk-free rate is 5.2%; and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 a share. Assuming the market is in equilibrium, what does the market believe will be the stock’s price at the end of 3 years (i.e. what is P3)?
What is the cost/volume/profit technique? Give examples where your company (Apple INC) could use this analysis. Be sure to explain how you would go about determining the numbers (individual components) for the calculation and any constraints you see ..
The interest rate on a five-year Treasury bonds is 3.1 percent, the rate on six-year T-bonds is 2.9 percent, and the rate on seven-year T-bonds is 2.6 percent. Using the expectations theory, compute the expected one-year interest rates in (a) Year 6 ..
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?
Determinants of Interest Rate for Individual Securities A particular security's default risk premium is 3.00 percent. For all securities, the inflation risk premium is 1.75 percent and the real interest rate is 2.75 percent. The security's liquidity ..
Calculate the YTM and YTC under those conditions, what is your stock's intrinsic value and what is the WACC - What is the bond's nominal yield to call?
The City of Ames issued a new series of bonds on Jan 1, 2009. The bonds were sold at par ($1,000), have a 3.5% annual coupon rate and mature in 10 years, on Jan 1, 2019. Coupon interest payments are made semi-annually (on June 30 and December 31). Wh..
Why is EBIT generally considered to be independent of financial leverage? Why might EBIT be influenced by financial leverage at high debt levels?
At the end of the year 2004 the Office Equipment Industry had free cash flow to equity (FCFE) of $2.50 per share. The following annual growth rates in FCFE are projected: Calculate the required rate of return on equity. Calculate the present value no..
Stan elects to receive his retirement benefit over 10 years at the rate of 2000 per month beginning one month from now. The monthly benefit increases by 5% each year. At an annual nominal interest rate of 6% compounded monthly, calculate the present ..
Annual dividend of 9% of its $100 par value. Preferred stock of this type yield at 6%. Assume dividends are paid annually. What is the value of preferred stock and interest rates levels increase to 12%. What the new preferred stock?
Revarop, Inc., is a fast-growth company that is expected to grow at a rate of 23 percent for the next four years. It is then expected to grow at a constant rate of 6 percent. Revarop’s first dividend, of $4.45, will be paid in year 3. If the required..
the abc company has a large order for special uniforms to be used in an urgent operation. working the normal two shifts
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