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Preferred stock valuation
Farley Inc. has perpetual preferred stock outstanding that sells for $42.00 a share and pays a dividend of $3.00 at the end of each year. What is the required rate of return? Round your answer to two decimal places.
Peter is about to retire from a company in which he worked for 24 years. Peter participated in Defined Benefit Plan which uses Unit Credit Formula (2.4% of average of 3 highest salaries multiplied by number of years of services). The three highest sa..
Assume a retail tenant is paying a base rent of $120,000 per year. In addition, the tenant must pay 10 percent of gross store sales in excess of $143,000 per month as percentage rent. If the store produces $170,000 in gross sales in a month, what is ..
Suppose you enter into a short 6-month forward position at a forward price of $60. What is the payoff in 6 months for prices of $50, $55, $60, $65, and $70? Suppose you buy a 6-month put option with a strike price of $60. What is the payoff in 6 mont..
AbiWord Inc. has a cost of equity of 12%, a pre-tax cost of debt of 6%, and a tax rate of 35%. What is project’s NPV using the company’s WACC as discount rate.
You borrowed $25,000 from your parents to buy a car. They want their money back in 5 months with interest at 6% (simple interest rate). What is the total amount you must pay them in 5 months (principle plus interest)?
The optimal capital structure simultaneously maximizes stock price and minimizes the WACC. The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price. The optimal capital structure simult..
A corporation has already sponsored a soft launch of a new suite of software among select customers, and now they are trying to decide their next steps. The expense of the soft launch is called a (an)
A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 7.3 percent per year forever. The price of the firms common stock is now $27.43. What is the cost of common equity?
Financial ratio analysis is conducted by four groups of analysts: managers, equity investors, long-term creditors, and short-term creditors. What is the primary emphasis of each of these groups in evaluating ratios?
Erin invests $3750 spread across three funds; Fund A, Fund B, and Fund C. Over the course of the following year, A(in dollars) was equal to %20 of the total return from all three funds fir the year. The amount invested in Fund B was equal to 1.2 time..
What is the main formula that determines a firm’s value? How do cash flows affect the value?
A Cfo believes project acceptance should be based on the nvp but Steve Camden, the president insists that no project should be accepted unless it's IRR Exceed the project's ris-adjusted WACC. now you must made a recommendation on a project that has a..
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