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Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 29% for the next 2 years, 18.60% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 5.75%. The company’s last dividend was $1.00, its beta is 1.85, the market risk premium is 10.15%, and the risk-free rate is 5.00%. What is the current price of the common stock?
Emilys current salary is $85,000 per year, and she is planning to retire 24 years from now. She anticipates that her annual salary will increase by$1,000 each year ($85,000 the first year, to $86,000 the second year, $87,000 the third year, and so fo..
Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out i..
Preferred stock returns Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $2, and its current price is $80. What is its nominal annual rate of return?
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only person voting for you. If Schenkel has 445,000 shares out..
You own a portfolio that has $3,600 invested in Stock A and $4,600 invested in Stock B. If the expected returns on these stocks are 10 percent and 13 percent, respectively, what is the expected return on the portfolio?
Acme Services’ CFO is considering whether to take on a new project that has average risk. She has collected the following information: • The company has outstanding bonds that mature in 26 years. The bonds have a face value of $1,000, an annual coupo..
At the quarterly meeting of Tangshan Mining Corporation, held on September 10th, the directors declared a $1.00 per share dividend for the firm’s 100,000 shares of common stock outstanding. The net effect of declaring and paying this dividend would b..
The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $72,000. The annual cash flows have the following projections. Use Appendix B and App..
During periods of high inflation, U.S. firms have strong incentives to purchase short-lived assets and frequently replace them, rather than investing in long-lived assets. True, False, Uncertain and Explain
Financial markets on the whole are probably much more efficient than real asset markets. Mutual funds managed by professional money managers consistently outperform index mutual funds. In corporate insiders can beat the market this is evidence that t..
Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $47, $312, and $88, respectively. If Baker undergoes a 2-for-1 stock split, what is the new divisor for the price-weighted index?
A company has a $20 million portfolio with a beta of 1.2. It would like to use future contracts on a stock index to hedge its risk. The index future price is currently standing at 1080, and each contract is for delivery of $250 times the index. What ..
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