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Enterprise storage company has 530000 shares of cumulative preferred stock outstanding which has a stated dividend of 6.75. It is six years in arrears in it's dividend payments. Use appendix b for an approximate answer but calculate your final answer using the formula and financial calculator methods. A. How much in total dollars is the company behind in it's payments? B. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years D1 1.60 D2 1.70 D3 1.80 D4 1.90 The company anticipates earnings per share after four years will be 4.18 with a pe ratio of 13. The common stock will be valued as the present value of future dividends plus the present value of the future stock price after four years. The discount grate used by the investment banker is 14 percent. Compute the value of the common stock. How many shares of common stock must be issued at the value computed in part b to eliminate the deficit (arrrearage) computed in part a. Round your answer to the nearest whole share.
The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probabilit..
Oxygen Optimization stock has an expected return of 14.49 percent and pays annual dividends that are expected to grow at a constant rate forever. The firm’s next dividend is expected in 1 year from today and is expected to be 24.12 dollars. If the fi..
The mortgage on your house is 5 years old. It required monthly payments of $1,450, had an original term of 30 years, and had an interest rate of 8% APR. You decide to refinance. The new mortgage had a 30-year term, requires monthly payments, and has ..
A video rental store will cost $650,000 to open. Assuming annual sales of $1 million, variable costs of 35%, fixed costs of $300,000, depreciation of $100,000, and a tax rate of 35%, calculate the NPV of the project over a 10-year horizon (no inflati..
The Treasury currently had a $0.9 trillion dollar deficit in Fiscal 2013 so the US government was issuing new long term securities (borrowing to cover the deficit) at an average rate of $75 billion per month. This decreases the money supply which sho..
The Garcia Company’s bonds have a face value of $1,000, will mature in 10 years, and carry a coupon rate of 16 percent. Assume interest payments are made semi annually. Determine the present value of the bond’s cash flows if the required rate of retu..
The Connors Company's last dividend was $1.00. Its dividend growth rate is expected to be constant at 15% for 2 years, after which dividends are expected to grow at a rate of 10% forever. Connors' required return (rs) is 12%. What is Connors' current..
The expected demand in October is 20,000 units, and there are 25 working days in October. The production rate is 10 units per day per employee. The initial inventory is 1,000 units, and the ending inventory target is 5,000 units. Following a chase st..
Note the following information on two mutually exclusive projects under consideration by Monroe Food Markets, Inc. Project A-Cash flows Year 0 $-30,000 1 $10,000 2 $10,000 3 $10,000 4 $10,000 5 $10,000 Project B-Cash flows Year 0 $-60,000 1 $20,000 2..
What is the time value of an option? Why does an option’s time value decline as the option approaches expiration? What variables effect the Time Value of an Option? The Intrinsic Value?
Using a 4.5% discount rate, calculate the Net Present Value, Payback, Profitability Index, and IRR for each of the investment projects below (note, the inflows are for each year). Based on your calculations rank the projects and support you answer.
What are the uses of Balance of Payments data? Describe the Current and Capital accounts of the Balance of Payments. Is the trade balance sensitive to exchange rates? Is the current account relevant in assessing macroeconomic-macrofinancial issues in..
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