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Kale Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, what is the firm's total corporate value, in millions?
Year 1 Free Cash Flow $-50
Year 2 Free cash flow $100
How are exchange-traded funds (ETFs) and unit investment trusts (UITs) different from index mutual funds, and from each other? Please list your points.
Measuring growth: Given that a firm's return on equity is 22% and management plans to retain 39% of earning for investment purposes, what will be the firm's growth rate? If the firm decides to increase its retention ratio, what will happen to the val..
Calculate the price of a zero coupon bond that matures in 15 years if the market interest rate is 5.5 percent. Par Value $1000. Zero coupon bond price .
Victoria Adeleye Co. has the following data for the year ending 12/31/10: Net income = $600; Net operating profit after taxes (NOPAT) = $700; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and ..
A bond sells for $941.15 and has a coupon rate of 7.80 percent. If the bond has 21 years until maturity, what is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. O..
Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.99 million. The marketing department predicts that sales related to the project will be $2.69 million per year for the..
Real Risk-Free Rate You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.6%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
Which of the following would lower the sum of the present values of expected cash flows?
Stock XYZ: earning at time 0 E0 = $2.50, b = 40%, ROE = 13%, risk-free rate is 3%, expected return on market portfolio is 9%, the beta of stock XYZ is 1.5, and CAPM is valid. (1) What’s the required rate of return k based on CAPM? (2) What’s D1 of st..
You obtain the following information concerning a stock, a call option, and a put option. What is the cash inflow or outflow from your position? What is profit or loss if the price of the stock stagnates and trades for $42 after three months? What is..
The expected yield on a one-year T-bill at the beginning of year 1 is 7.20%. The expected yield on a one-year T-bill at the beginning of year 2 is 7.80%. Using the pure expectations theory of the term structure of interest rates, what is the expected..
Prepare the journal entries through June 30, 2011, to record the investment in notes, interest, and necessary adjustments for changes in fair value.
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