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The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): CAPM method, DCF method, and Bond-yield-plus-risk-premium method. Since we cannot be sure that the estimate obtained with any of these methods is correct, it is often appropriate to use all three methods, then consider all three estimates, and end up using a judgmental estimate when calculating the WACC, such as _______________ rate of them.
An orcharder spends $100,000 to planet pomegranate bushes. It will take four years for the bushes to provide a usable crop. He estimates that every year for 20 years after that he will receive a crop worth $9,500 per year. If the discount rate is 9%,..
Suppose the US dollar and Euro interest rate for the next one year are 1.5% and 2%, respectively. Both are annually compounded. The spot price of Euro is $1.3000, and the one-year forward price of Euro is $1.2900. Determine the correct forward price ..
What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets has a beta of .5, what are the portfolio weights? If a portfolio of the two assets has an expected return of 8 percent, what is it..
Mess man Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $3.50 per share and 3%, respectively. If the flotation cost is 9% of the issue's gross proceeds, what is the cost of external equi..
Taylor Textbooks Inc. buys on terms of 1/12, net 59 days. It does not take discounts, and it typically pays on time, 59 days after the invoice date. Net purchases amount to $550,000 per year. On average, what is the dollar amount of costly trade cred..
X Company, a manufacturer, reported the following inventory balance for 2012: What was Cost of goods sold for the year?
The Newport Beach Sanitary Agency is presently shipping its waste to another municipality at an annual cost of $100,000. It is considering building a landfill near the city. Show how to calculate the present value of this project. Explain why the IRR..
You have the following bond: $1000 Par, 22 years to maturity, Mkt rate of 9.75%, coupon of 10.25%, compounded semi-annually. The PV of the bond is $1044.97. What contribution to this $1044.97 does the coupon payment 27 periods from today make to this..
Winners Games reported sales of $72,000 and net income totaling $12,000 during the year. It’s selling price is $6 per unit, its variable cost is $2 per unit, and its total fixed costs are $36,000. How much is the projected margin of safety? What is a..
On January 15, 2013, A common stock sells for $82 per share, has a growth rate of 7% and a dividend that was just paid of $3.82 in December 2012. What is the annual percent yield per share?
step 1 ratio analysis1.this assessment task involves you calculating a range of ratios for your firm and using these
The preferred stock of Dolphin Pools pays an annual dividend of $6.25 a share and sells for $42 a share. The tax rate is 35 percent. What is the firm's cost of preferred stock?
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