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Value of Growth Opportunities A firm has projected annual earnings per share of $5.00 and a dividend payout ratio of 65%. The firm's required return is 18% and dividends and earnings are expected to grow at 3% per year indefinitely. For this firm the present value of its growth opportunities is ________.
$49.44
$52.73
$12.22
$37.22
Beta and Value A firm is expected to pay an annual dividend of $.90 next year. After next year the firm’s dividends will grow at a steady state rate of 4% per year. You are trying to value the stock and Value Line lists a stock beta of 1.29 while Yahoo is reporting a beta of 1.20. The stock is currently priced at $13.10. If E(RM) – Rf = 9.1% and the risk free rate is 3.2% the stock is ____________________ if you use the Value Line beta and is ____________________ if you use the Yahoo beta.
underpriced by $1.31; underpriced by $1.61
overpriced by $4.21; overpriced by $4.87
overpriced by $4.87; overpriced by $4.21
underpriced by $1.61; underpriced by $1.31
Price-Earnings Ratios A firm has positive ROE but zero growth in earnings. The stock is priced at $34.00 and has earnings of $4.20 per share. What is the firm's required return and optimal retention ratio?
8.10%; 1
12.35%; 1
12.35% ; 0
8.10%; 0
A Japanese firm issued and sold a dollar-denominated bond in the United Kingdom. A U.S. firm issued bonds denominated in yen and sold the bonds in Japan. Which one of the following statements is correct?
How is risk identified in a company and how is it evaluated and measured? How does a company’s portfolio analysis impact its decision making?
Find the after-tax return to a corporation that buys a share of preferred stock at $32, sells it at year-end at $32, and receives a $4 year-end dividend. The firm is in the 30% tax bracket.
IBM sells a Treasury bond futures agreement for $94,000. On the delivery date, the spot price is $95,000.- IBM sold the futures agreement to speculate. Does IBM win or lose? Explain.
What is the required return on equity implied by the dividend growth model (DGM)?
Which of the following stock investments should be accounted for using the cost method?
The annual annuity stream of payments that has the same present value as a project's costs is referred to as which one of the following? Which one of the following is an example of a sunk cost?
A bond has a coupon rate of 5.65 percent, a face value of $1,000, semiannual payments, and sells at par. The current yield is _____ percent and the effective annual yield is _____ percent.
You are looking into a company that has never paid a dividend. They have just announced that they will be paying a one-time dividend of $20 per share in two years. what is the value of the stock today? What will the value of the stock right after th..
You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account and $300 a month in a bond account. When you retire, you will combine your money into an account that pays an EAR of 8%. How ..
What would be the nominal and effective cost of such a credit?
Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $50,000 for the current period. Assuming an ordinary tax rate of %35, compute the firm's earnings after taxes and earnings available for common sto..
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