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Suppose Chance Chemical Products management conducts a study and concludes that if it expands into a consumer products division (which is less risky than its primary business of industrial chemicals), the firm's beta would decline from 1.2 to 0.9. However consumer products have a somewhat lower profit margin, and this would cause Chance's constant growth rate in earnings and dividends to fall from 7 to 5 percent. Should management undertake this change assuming that the average market return is 12% will the rate on Treasury notes is 9%? Chance has just paid a dividend of $2.
Write your recommendation taking into account some of the general issues involved in the assessment (eg. principles involved in company diversification, estimation of beta's etc.)
You’ve collected the following information about Odyssey, Inc.: Sales $ 165,000 Net income $ 14,800 Dividends $ 9,300 Total debt $ 68,000 Total equity $ 51,000. What is the sustainable growth rate for the company? What growth rate could be supported ..
A 8.7 percent coupon bond with 19 years left to maturity is priced to offer a 6.85 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.5 percent. What would be the total return of the bond in dollars? What would b..
Using the dividend growth model. what should be the price of the company's stock today (December 31, 2013)?
An 8% semiannual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 8.2123%. What is the bond's price? What is the bond's YTM?
Which of the following are usually known with a high level of confidence at the beginning of a project? A. The number of units that will be sold B. The price per unit that will result in the desired number of units sold C. Tax rates and depreciation ..
How do you read an Edgar cash flow statement for corporations.
Lewis Finance Investor Group, Inc. is considering a new project, which would include opening a college textbook store approximately 2 miles north of campus on Rt. 53. The initial investment (outflow) will include inventory, land and a building. What ..
Newson Corp is predicting net income of $50,000 this year and expects this amount to increase by $4,000 every year into the future. If the 30-year government bonds are paying 6.5% and there are 100,000 shares outstanding, what is the present value of..
Assuming Ferrell's price/earnings ratio remains at its current level, what will be its stock price 1 year from now?
Compute “Road-Master Inc.”’s free cash flow for 2016, and its Return On Invested Capital (ROIC) for the years 2015, and 2016.
ExxonMobil 9?-year bonds pay 12 percent interest annually on a ?$1,000 par value. If the bonds sell at $1,175, what is the? bonds' expected rate of? return?
Paramount Landscape Services is considering the acquisition of Barker Gardens, Inc. Paramount's management team believes Barker can generate cash flows of $187,000, $220,000, and $245,000 over the next three years, respectively. After that time, they..
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