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Compost Science Inc. (CSI) is in the business of converting Boston's sewage sludge into fertilizer. The business is not in itself very profitable. However, to induce CSI to remain in business, the Metropolitan District Commission (MDC) has agreed to pay whatever amount is necessary to yield CSI a 14% book return on equity. At the end of the year, CSI is expected to pay a $3 dividend. It has been reinvesting 40% of earnings and growing at 3% a year.
a-1. Suppose CSI continues on this growth trend. What is the expected long-run rate of return from purchasing the stock at $100? (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number.)
a-2. What part of the $100 price is attributable to the present value of growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Now the MDC announces a plan for CSI to treat Cambridge sewage. CSI's plant will, therefore, be expanded gradually over five years. This means that CSI will have to reinvest 80% of its earnings for five years. Starting in year 6, however, it will again be able to pay out 60% of earnings. What will be CSI's stock price once this announcement is made and its consequences for CSI are known? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Which of the following statements about acceptance sampling is true
Question1 ABC Corporation is considering an expansion project. The proposed project has the following features:The project has an initial cost of $1,000,000 (machine: $800,000, insurance: $40,000, shipping $60,000, modification: $100,000)
At expiration the stock is at $55.93. What is the net economic gain or loss on the entire stock & Option portfolio?
Assume that the real risk-free rate is 4 percent and the maturity risk premium is zero. If the nominal rate of interest on one-year bonds is 11 percent, and on comparable-risk two year bonds it is 13 percent, what is the one-year interest rate that i..
A company is considering replacing an existing machine (defender) with newer machine (challenger). If repaired, the defender can be used for another 5 years.
The current share price is $84, and the book value per share is $11. The company also has two bond issues outstanding.
Prentice Company, Inc. had cash sales of $95,075, credit sales of $83,925, sales returns and allowances of $2,025, and sales discounts of $3,800. Prentice's net sales for this period equal:
If you invest $4,000 and $6,000 in Stock A and Stock B respectively, what is the standard deviation of the portfolio?
US long-term bonds had the nominal rates of return of 4.99 percent. What is the real rate of return for a US long-term bond?
Complete the following statements about the distribution of lifetimes of all Ultra batteries. (a) According to Chebyshev's theorem, at least ?56%75%84%89% of the lifetimes lie between 711 hours and 1059 .
consider the following investment cash flowsyearcash flow0100012502400350046005600a. what is the return expected on
Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.
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