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You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the? drug's profits will be $1 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent? expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per? year?
Find the after-tax return to a corporation that buys a share of preferred stock at $32, sells it at year-end at $32, and receives a $4 year-end dividend. The firm is in the 30% tax bracket.
Which one of the following would be most likely to trigger a decrease in the price of a corporate bond issued by Kroger Stores?
A company is estimating its optimal capital structure that consists of 20% debt 880%equity, based on market values (debt to equity D/S ratio is 0.25). The risk free rate is 5% and the marker risk premium is 6%. Currently the company's cost of equity...
Hooper Printing Inc. has bonds outstanding with 19 years left to maturity. The bonds have an 7% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen ..
Hope Industries just paid a dividend of $2.00 per share (i.e., D0 = $2.00). Analysts expect the company's dividend to grow at 30 percent this year and at 20 percent in year 2. What should be the current stock price of Hope?
Why is capital budgeting an important process in the firm value-maximizing process of firms? What is the decision rule for the net present value technique?
Fooling Company has a 10.8 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $100. What is the yield to call (YTC) for this bond if the current price is 105 percent..
Proposition I (with Corporate Taxes) Firm value increases with leverage VL = VU + TC B. Proposition II (with Corporate Taxes) Some of the increase in equity risk and return is offset by the interest tax shield 5. Based on the second proposition, what..
Create the relationship(s) between/among the tables, as appropriate. Label the database with your last name and HW#6
SWAP The forward prices on a barrel of crude oil are $43 and $45 in years one and two, respectively.
Using graphical method determine the nominal rate of return that you earned on this bond.
What is the expected return of Intel stock? What is the expected return of Boeing stock?
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