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A corporation with very high growth prospects and many positive NPV projects to fund may want to increase its dividend based on the: A. very low agency costs of corporation B. information effect C. tax bias against capital gains D. residual dividend theory
Operating income (EBIT) $600 million, Interest expense $0, Tax rate 35%, Debt $0, Cost of equity 7%, WACC 7% . The company has no growth opportunities (g = 0), so the company pays out all of its earnings as dividends.
Your firm is considering developing an apartment complex. The firm owns land that could be used for the project; it was bought last year for $500,000. Real estate has gone up sharply in the last year: the land could be sold today for $625,000. Fixed ..
Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable material cost is $1.15 per unit, and the variable labor cost is $2.07 per unit. What is the variable cost per unit? Suppose NSI incurs fixed costs of $670,000 during a year in whic..
Calculate the firms earnings per share (EPS) for each year, recognising that the number of shares issued has remained unchanged since the firm's inception. Comment on the EPS performance in view of your response to question 1a.
Star Light & Power increases its dividend 2.9 percent per year every year. This utility is valued using a discount rate of 9 percent, and the stock currently sells for $52 per share. If you buy a share of stock today and hold on to it for at least th..
Land is purchased for $75,000. It is agreed for the land to be paid for over a 5 year period with annual payments and using 12% annual compound interest rate. Each payment is to be $3000 more than the previous payment. Determine the size of the last ..
There are two financing plans available to the Small/Downey Construction Company summarized herewith: Assuming a 40 percent tax rate, what is the financial breakeven point for each plan?
What sort of relationship is portrayed by asset pricing models (between which variables)? To what extent are the assumptions behind the asset pricing models realistic? Do the assumptions pose a problem in applying the models in real life? Give an exa..
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $1.566 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be sold f..
A six month $47,000 Treasury bill with a discount rate of 3.717% was sold in 2009. Find the Price of the Bill. Actual interest rate paid by treasury.
A stock will not pay a dividend for 3 years and then will pay a $5 dividend (D4) that will grow constantly at 5%. If the required rate of return for this stock is 10%, what is the value today?
Read the article entitled: Net Operating Working Capital Behavior: A First Look (Hill, M.D, Kelly, G.W., Highfield, M.J. (2014). The results of their research suggested that operating and finance conditions should be considered when evaluating capita..
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