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Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of it's earnings. However, investors expect Simpkins to begin paying and dividends, with the first dividend of $.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 80% per year - during years 4 and 5. After year 5, the company should grow at a constant rate of 7% per year. If the required return on the stock is 16%, what is the value of the stock today? (assume the market is in equilibrium with the required return equal to the expected return.)
Suppose a German company issues a bond with a par value of 1000, 15 years to maturity, and a coupon rate of 7.7 percent paid annually. If the yield to maturity is 8.8 percent, what is the current price of the bond
A firm offers terms of 2/15, net 40. What effective annual interest rate does the firm earn when a customer does not take the discount. Without doing any calculation,
Determine the effect on net income and earnings per share for issuing stock and issuing bonds. Assume the new shares or new bonds will be outstanding for the entire year.
Investors generally can make one vote for each share of stock they hold. TIAA-CREF is the largest institutional shareholder in the United States; therefore it holds many shares and has more votes than any other organization.
A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 80% debt. The interest rate on the debt would be 8%.
ABC hospital, a not for profit acute care facility, expects to have a patient load of 20,000 inpatient days next year and has the following cost structure for its inpatient services
one of the advantages of leasing voiced in the past is that it kept its liabilities off the balance sheet, thus making it possible for a firm to obtain more leverage than it otherwise could have.
For 2012, Everyday Electronics reported $22.5 million of sales and $18 million of operating costs (including depreciation). The company has $15 million of investor-supplied operating capital.
You buy a zero coupon bond at the beginning of the year that has a face value of $1000, a YTM of 9 percent, and 12 years to maturity. You hold the bond for the entire year.
A)calculate the future value of $6,000, given that it will be invested for 5 years at an annual interest rate of 6 percent. B) recalculate part (a) using a compounding period that is semiannual (every 6 months).
Alongside, plot your choice of yields of bonds from a publicly traded organization, for the same time periods. * Compare the two yield curves and answer the following questions: Which yield curve is higher
Russo's Gas Distributor, Inc. wants to determine the required return on a stock with a beta coefficient of 0.5. Assuming the risk free rate of 6 percent and the market return of 12 percent.
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