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Cost of Common Equity The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 3% per year. Callahan's common stock currently sells for $27.25 per share; its last dividend was $2.00; and it will pay a $2.06 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. % If the firm's beta is 0.80, the risk-free rate is 3%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 10%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. %
Is there credit risk in an interest rate swap with an intermediary bank serving as the swap dealer? Describe when default losses might arise and which party is at risk. Explain how credit risk can be reduced.
Management of Telemore Company is considering developing and marketing new product. What is the maximum cost of survey that makes it worth conducting?
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Describe how would you test this hypothesis?
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Research Case—Delinquent Taxes. When property taxes become delinquent, governmental entities often accrue interest and penalties on the delinquent taxes or choose to sell the rights to collect such taxes, interest, and penalties to exter-nal parties.
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While Steve Bouchard was a student at the University of Florida, he borrowed $12,000 in student loans at an annual interest rate of 9%. If Steve repays $1,500 per year, how long, to the nearest year, will it take him to repay the loan?
Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 20 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 14 percent and the company just paid a div..
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