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Knurrvig Company reported earnings per share of $2,40 in 2007 and paid dividends per share of $1,06. The earnings had grown 7,5% a year over the prior five years and were expected to grow 6% a year in the long term (starting in 2008). The stock had a beta of 1,05 and traded for ten times earnings. The treasury bond rate was 7%.
a. Estimate the PE Ratio for Knurrvig Corporation.
b. What long term growth rate is implied in the firm's current PE ratio?
Assume that the only market imperfections are corporate taxes and financial distress costs.
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made at the beginning of 2016 are as follows: ($ millions) 2017 2018 2019 2020 2021 Net income 1.0 2.0 3.2 3.7 4.0 Investment 1.0 1.0 1.2 1...
Calculate and interpret net present value (NPV) method for investment decisions with suitable example.
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Determine the debt ratio (D/E) of the firm after the dividend payment.
A company's stock currently sells for $59.57. The company EXPECTS to pay a dividend in one year of $1.75. The analyst's estimate of the company's future growth prospects is that the company will grow at a constant rate of 4%. What is the market's req..
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Calculate the price of an option that caps the 3-month rate, starting in 15 months' time, at 13% on a principal amount of $1,000.
Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs $20,000 per year as of the time when Amy turns to age 18. If her parents have saved $10,000 for this goal. What’s PV of Amy’..
What methods for resolving this dispute are available to the parties? What are the ramifications of pursuing each different method?
You are a research scientist with a new drug idea. It costs $100 million to create a lab and test it.
Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $8, the market capitalization ..
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