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1. Terminal Emulator Co. pays a constant $11.66 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 14 percent, what is the current share price?
2. Screenshot, Inc., just paid a dividend of $3.72 per share on its stock. The dividends are expected to grow at a constant rate of 3.6 percent per year, indefinitely. Assume investors require an 14.4 percent return on this stock. What is the expected price of this stock in 9 years?
Pierce Furnishings generated $4 million in sales during 2012, and its year-end total assets were $3.2 million. Also, at year-end 2012, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,..
Ten years ago, News Corp. raised capital by issuing 20-year quarterly coupon bonds with $1,000 par value. a. If investors required 12% return, quarterly compounding, for News Corp.’s bonds when the bonds were issued ten years ago, what should be the ..
The internal rate of return and net present value methods:
Four economic classifications of mergers are (1) horizontal, (2) vertical, (3) conglomerate, and (4) congeneric. Explain the significance of these terms in merger analysis with regard to (a) the likelihood of governmental intervention and (b) possibi..
Nedo Enterprises originally sold bonds in 2011 with a 10 year maturity, $1000 par, 6% coupon paying annual interest. It is now 2015 and 4 years later. Bonds of similar risk selling at par know have a 5% coupon rate. What price would bond investors be..
In tight housing markets, rent controls are often applied to hold the price of housing to a reasonable level. How does this policy affect the relative gains of tenants and landlords, and the allocative function of prices?
TechNo Corp is a rapid-growth IT firm. TechNo expects to grow at 25% for the next four years. After year four, growth will moderate at 4.75% and TechNo will pay a dividend of $3.25 per share in year five. If TechNo’s required return is 13.2% and the ..
Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. At what level of pretax cost ..
Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $5.7 million. The equipment will be depreciated straight line over 6 years to a value of zero, but in fact it can be sold after 6 years fo..
A stock has a beta of .80, the expected return on the market is 18 percent, and the risk-free rate is 3.70 percent. What must the expected return on this stock be?
You are considering the purchase of crown bakery inc. Common stock that just paid a dividend of $20 per share. You expect the dividend to grow at a rate of 5.28 % per year, indefinitely. You estimate that a required rate of return of 12.25 percent wi..
You are given the following information for Lightning Power Co. Assume the company’s tax rate is 30 percent. Debt: 6,000 7.9 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semi..
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