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Assume that a high tech company is expecting to grow at a rate of 25% over the next 4 years, and then decline over the next 3 years (years 5-7) to a growth rate of 10%. Determine the price of the stock that is currently paying a $1 dividend and has a discount rate of 17% by using:
a. the three-stage growth model
b. the H-model
c. explain the reasons for the difference
Suppose you invest $10,000 in a savings account earning 2% interest (compounded yearly) with no risk. After 7 years, how much will you have? How does this change your overall return on investment?
Find the price at t0 of the floating rate bond. - Using a replication argument, find the forward price at t for the floating rate bond (for a forward contract with maturity T), t0.
Suppose XG is considering an expansion which it will finance through additional bond sales. Current outstanding XG bonds are selling for $1,148.77. These have a face value of $1,000, and a coupon of 8% and 10 years to maturity. If interest is paid se..
Suppose IBM would like to borrow fixed-rate yen, whereas Korea Development Bank (KDB) would like to borrow floating-rate dollars. IBM can borrow fixed-rate yen at 4.75% or floating-rate dollars at LIBOR + 0.35%. What is the range of possible cost sav..
You purchased a call option for $3.45 17 days ago. The call has a strike price of $45 and the stock is now trading for $51. If you exercise the call today, what will be your holding period return? If you do not exercise the call today and it expires,..
What amount of prime costs was added to production during 2012? What amount of conversion costs was added to production during 2012?
Filer Manufacturing has 7.4 million shares of common stock outstanding. The current share price is $44, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. Suppose the company’s stock has a beta of 1.3. The r..
If she rebalances her portfolio to keep the same expected return but reduce her exposure to inflation to zero (i.e., bp2 = 0), what will its sensitivity to the first factor become?
Ed’s Company bonds currently sell for $945, have a 13% coupon rate, pay interest annually, have a $1,000 par value, with 10 year remaining to maturity. Calculate the yield to maturity using the more precise trial-and error present-value base approach..
After some negotiating, the bank extended the term of the note and increased the interest rate. What is Mr. Black's position at this stage of the transaction?
A company is composed of five cost centers. Each month a budget is prepared anticipating the distribution of overhead costs to the centers. Let Cw be costs incurred within the cost center, such as depreciation, supplies and indirect labor, and let Cm..
Siva, Inc., imposes a payback cutoff of three years for its international investment projects. Year Cash Flow (A) Cash Flow (B) 0 –$ 61,000 –$ 71,000 1 23,500 15,500 2 29,000 18,500 3 21,500 27,000 4 8,500 231,000 What is the payback period for both ..
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