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a. XYZ Corporation has 1 million shares of stock outstanding and has annual income of $8 million. The company has no expansion opportunities and depreciation equals the replacement cost necessary to maintain operations. Therefore income is available to distribute as dividends and is expected to continue indefinitely. The cost of capital is 14%. What is the current value per share of XYZ Corporation stock?
b. A new opportunity arises for XYZ. The investment will cost $1 million three (3) years from now (t = 3) and will generate income available for dividends of $500,000 in year 4, $600,000 in year 5 and $700,000 in year 6. What is the value today per share of that future investment opportunity?
Two mutually exclusive investment opportunities require an initial investment of $5 million. Investment A generates $1.5 million per years in perpetuity, while investment b pays $1 million in the first year, with cash flows increasing by 3% per year ..
You want to be a millionaire when you retire in 35 years. How much do you have to save each month if you can earn an annual return of 11.2 percent? How much do you have to save each month if you wait 10 years before you begin your deposits?
Comment on Leo's ethics when assuring his friends and relatives that the investments he recommends can produce major rewards with virtually no risk.
An American Depository Receipt (ADR) is a security issued by a U.S. bank and traded on a U.S. stock exchange that represents a specific number of shares of a foreign stock. Siemens AG has an ADR that trades on the NYSE and is equivalent to one share ..
Suppose a firm using accelerated depreciation instead of straight line depreciation. What effect would this have on their finical statements?
Dennis earns $55,000 in the current period and will earn $85,000 in the future. What is the minimum interest rate that would allow Dennis to con- sume $180,000 in the future period? What is the maximum interest rate that would allow Dennis to con- su..
What are the prices of pure security 1 and pure security 2? - What is the initial price of a third security i, for which the payoff in state 1 is $6 and the payoff in state 2 is $10?
You are planning to purchase a new house or condominium to use as your primary residence. This assignment will analyze some of the financial aspects of doing so. Compute the effective interest rate for this loan. Compute the monthly payment amount of..
For each of the following annuities, calculate the annual cash flow. (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Cash Flow Present Value Inter..
A hospital is a non-tax paying entity who is adding a new wing for pediatrics. Compute the NPV and IRR to determine feasibility of the project. How do I compute this? This same hospital is now a tax-paying entity with a tax rate of 30%. Compute the N..
A call option with X = $51 on a stock currently priced at S = $54 is selling for $8. Using a volatility estimate of σ = 0.34, you find that N(d1) = 0.7311 and N(d2) = 0.6722. The risk-free interest rate is zero. Is the implied volatility based on the..
Payments by check can easily be controlled if ________________.
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