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The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 5% per year. Carpetto's common stock currently sells for $20.75 per share; its last dividend was $1.80; and it will pay a $1.89 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. % If the firm's beta is 1.50, the risk-free rate is 5%, and the average return on the market is 14%, 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 8%, 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 Carpetto's cost of common equity? Round your answer to two decimal places. %
Use this information to answer the following 2 related questions: Rob is a financial manager with Sharez, an investment advisory company. He must select specific investments—for example, stocks and bonds—from a variety of investment alternatives. Wha..
What is the net present value of a project if the required rate of return is 12 percent? The cash flows, in order, are -$42,398 (initial cost), $13,407 (year 1 CF), $21,219 (year 2 CF) and $17,800 (year 3 CF).
Oxygen Optimization stock has an expected return of 14.49 percent and pays annual dividends that are expected to grow at a constant rate forever. The firm’s next dividend is expected in 1 year from today and is expected to be 24.12 dollars. If the fi..
Are bond ratings in concept similar to your own personal credit ratings? The U.S. government is the world’s largest borrower and currently enjoys a high-rating for its low default risk. Explain how receiving a lower bond-rating may affect the U.S. go..
Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and inventory of $409. What is the value of the quick ratio?
Whispering Pines, Inc. is all-equity-financed. The expected rate of return on the shares is 12%. Calculate the opportunity cost of capital for an average-risk Whispering Pines investment. Calculate the company’s weighted-average cost of capital at th..
An investor purchases a stock for $56 and a put option for $.80 with a strike price of $50. The investor also sells a call option for $.80 with a strike price of $66. What is the maximum profit and loss for this position?
In today's economic climate determine which of the three types of risk- liquidity, interest rate or credit affects the finance company the most. Recommend a way to lessen the risk.
Booher Book Stores has a beta of 1.1. The yield on a 3-month T-bill is 4.5% and the yield on a 10-year T-bond is 7%. The market risk premium is 5%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places
Target Company is trading at $20 a share at the end of the year 2006 and has 1 million shares outstanding. Acquirer Corp. is trading at $50 a share and has 3 million shares outstanding. How many outstanding shares will Acquirer have if they are succe..
A stock has an expected return of 7%. What is its beta? Assume the risk-free rate is 4% and the expected rate of return on the market is 12%.
Which of the following factors does not affect a firm's business risk?
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