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A stock is expected to have a dividend next year of $2 per share. Then, dividends are expected to grow at a rate of 10% per year for another 2 years. Then growth will slow down to an industry average of 5% forever. Based on past returns, this stock has a correlation of 0.6 with returns to the overall market. The overall market has a standard deviation of 0.15 while the stock has a standard deviation of 0.35. Historically, the market has returned 8.5% more than T-bills in an average year. The current yield on T-bills is 4.5%. Right now, the stock is quoted at $30 in the market, should you buy or sell this stock? Show your work.
In which case it will receive an additional $100,000 at t = 1 but no cash flows after t = 1. Assuming that the cost of capital remains at 12%, what is the estimated value of the abandonment option?
Discuss the differences in the two corporations in approximately 75 words. Your answer can be completed below your spreadsheet analysis.
A couple has owned and lived in their personal residence for 10 years. They purchased the home for $300,000. They sell the home for $900,000. How much of the gain is taxable?
If the expected T-bill rate is 1.5 percent, what is the expected risk premium on the portfolio?
If the firm has an asset turnover ratio of 4.0 times, what is the profit margin (return on sales)?
Pearl invests $80,000 for a 10 percent partnership interest in an activity in which she is a material participant. The partnership reports losses of $500,000 in 2007 & $450,000 in 2008.
Suppose that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 12.00 percent required return. The risk-free rate is 4.75%. You now receive another $10.00 million,
it is is true that Vertical integration involves the acquisition of competitors and Synergy is a common motive for mergers
Income statements for three companies are provided below: Make new income statements for companies assuming each sells one unit less
L. company recently reported the following income statement for 2004. The corporation forecasts that its sales will increase by 8 percent in 2005 and its operating costs will increase in proportion to sales.
A $100,000 dollars is available to invest in portfolio containing stocks X and Y, and a risk-free asset. All of the money must be invested. The aim is to make a portfolio that has an expected return of 12.5 and that has only 60 percent of the risk of..
The bond makes no payments for the first six years, then pays $2,100 every six months over the subsequent eight years, and finally pays $2,400 every six months over the last six years. What is current price of Bond M?
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