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The current market prices of stocks A and B are $20 and $30 respectively. Stock A is expected to pay a dividend of $2 per share and stock B does not pay dividends. Yahoo Finance estimates a one-year price target of $25 for A and $33 for B. The beta of A is 3.0 while the beta of B is 1.5. The 10-year Treasury bond yields 3%. The market risk premium is 6%. Given the above information
a) both stocks are undervalued.
b) stock A is undervalued and B is overvalued.
c) stock A is overvalued and B is undervalued.
d) both stocks are overvalued.
Your firm has an average collection period of 39 days. Current practice is to factor all receivables immediately at a 2.00 percent discount. What is the effective cost of borrowing in this case?
How the ratios discussed this week could be used to evaluate a company of your choice. Use finance.yahoo.com for additional information.
Suppose you purchased a stock on June 5 for $30. It paid $0.20 cash dividends on July 1 and Oct. 1, and you sold it for $31.16 on Dec. 18. What is the annualized holding period return (APY) of this investment?
Calculate the present value of $7,000 received four years from today if your investments pay
Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 1500, 1200, 800 and 300 respectively. Project L is a 4 year project ..
Henry swaps his shopping center for Sarah’s office building, and the exchange qualifies as a like-kind exchange. Henry’s adjusted basis for the shopping center is $600,000 and the center is subject to a liability of $180,000. The FMV of Sarah’s offic..
A proposed cost-saving device has an installed cost of $760,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $58,000, the margi..
The total return on a stock is equal to: the annual dividend divided by the current stock price. the difference between the capital gains yield and the dividend yield. the capital gains yield plus the dividend yield. (1 + Dividend yield) × (1 + Infla..
Holiday Hiatus, a luxury vacation rental company, issued 15 year bonds to raise the capital needed to construct a five-star, all-inclusive tropical resort on the island of Bermuda. What is the value of the bond if the interest were to be paid annuall..
Free Cash Flow You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $205 million, paid taxes of $43 million, and its depreciation expense wa..
In Period 1, the predicted value of the Mexican peso was $0.13 and the realized value was $0.14. In period 2 the predicted value was $0.14 and the realized value was $0.12. In period 3, the predicted value was $0.13 and the realized value was $0.15. ..
At year-end 2013, Wallace Landscaping’s total assets were $1.5 million and its accounts payable were $380,000. Sales, which in 2013 were $2.4 million, are expected to increase by 15% in 2014. Total assets and accounts payable are proportional to sale..
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