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In 30 years, Andy plans on setting up a fellowship fund for his wife's school that pays out $100, 000 per year in perpetuity with an annually compounded discount rate of 5%. In order to set up the fund in 30 years, how much does Andy need to save each year (starting this year) assuming he can get a semi-annually compounded return of 10% per annum on his savings for the next 30 years?
Suppose your company needs to raise $45 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 6 percent, and you’re evaluating two issue alternatives: Calculate the aftertax cash flows for..
A share of common stock has an expected long-run constant dividend growth rate of 8%, and next year dividend D1 expected to be $3.00./share the required rate of return on the common stock is 14%. Then, using the dividend growth model, calculate the c..
FUTUREDIV INC doesn't pay divdends now, but will pay a dividend of $4.1, 7 years from now and will increase dividends by 2.7% per year thereafter. If investors require a return of 10.1% on this stock, what is the value of the FUTUREDIV stock?
Which institution, University of Texas and a local bank, do you expect to have more tangible assets as a percentage of total assets in its balance sheet? And why?
EFFECTIVE VERSUS NOMINAL INTEREST RATES: Bank A pays 4% interest compounded annually on deposits, while Bank B pays 3 5% compounded daily. Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year..
From the case study, examine the significant differences between the Harley-Davidson 2008 securitization and the 2009 securitization and the manner in which these differences are indicators of the financial health of the company. Examine the impact o..
In a rare moment of generosity, you give your nephew $100 on his first birthday. Your nephews mother, however, knows the time value of money, so she invests the money in a 20-year 7% CD. (At maturity the CD pays back the principal plus accumulated in..
The stock of Pills Berry Company is currently selling at $60 per share. The firm pays a dividend of $1.80 per share. What is the annual dividend yield? If the firm has a payout rate of 50 percent, what is the firm’s P/E ratio?
The price of a bond with 4% annual coupon and $100 face value in year T is $90. Is the yield to maturity greater than, the same, or less than to the annual coupon rate? Explain in one sentence. Calculate the current yield in period T. Calculate the r..
As a recently appointed auditor for Gibbs Manufacturing Co., the Manager of the audit, asked you to examine selected accounts before issue the financial statement of 12/31/10, to be audited. The straight method is used to depreciation fixed assets. T..
ABC just paid a dividend of D0 = $4.5. Analysts expect the company's dividend to grow by 34% this year, by 28% in Year 2, and at a constant rate of 7% in Year 3 and thereafter. The required return on this stock is 17%. What is the best estimate of..
Which two of the methods used to evaluate project, and used to decide whether or not they should be accepted, do you prefer as a financial manager? Explain why you decided on these two and not the others. List the perceived deficiencies of the four n..
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