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Vansel Inc. retains most of its earnings. The company currently has earnings per share of $11. Vansel expects its earnings to grow at a constant rate of 2 percent per year. Furthermore, the average PE ratio of all other firms in Vansel's industry is 12. Vansel is expected to pay dividends per share of $3.50 during each of the next three years. If investors require a 10 percent rate of return on Vansel stock, a fair price for Vansel stock today is $____.
A company wishes to select the best of three possible computers, each expected to meet the University's growing need for computational and storage capacity. The initial outlay and annual cash flows over the life of each computer are shown in the foll..
Compute Macaulay and modified durations for the following bonds: a 5-year bond paying annual coupons of 3.322% and selling at par. an 8-year bond paying semi annual coupons with a coupon rate of 9% and a yield of 8%
The total market value of Okefenokee Real Estate Company's equity is $3 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 1.1 and that the expected risk premium on the market is 10..
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.56 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. If investors require a 11 percent return on The Jackson-Timberlake War..
Suppose you buy stock at a price of $83 per share. Three months later, you sell it for $89. You also received a dividend of $.38 per share. What is your annualized return on this investment?
If a stock has a beta of 1.3 would its required rate of return be higher or lower than the required return for the average stock on the market? Why? Would it be more or less risky than holding a fund that replicated the S&P 500 Index ? Why?
Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays an annual coupon rate of 4.71 percent. If the current market rate is 6.45 percent, what is the maximum amount Pierre..
Both Bond Bill and Bond Ted have 11.4 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 22 years to maturity. If interest rates suddenly rise by 2 percent, what is the perc..
Suppose you are running a capital budgeting analysis on a project with an estimated cost of $2 million. The project is considered similar to the existing lines of businesses for the company. Given the cash situation, the company will fund the project..
Summerdahl Resorts' common stock is currently trading at $30.00 per share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 5% a year. What is the..
Consider an asset that costs $511,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $168,000. If the relevant tax rate is 34..
UM Graduation Supplies has debt-to-equity ratio of 80%, profit margin of 10%, total sales of 10 million and total assets of 5 million. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomp..
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