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1. IBM's income, assets, and stock price have been growing at an annual rate of 20% and are expected to continue to grow at this rate for 2 more years. They just paid a dividend of $2.00 and will continue to pay at the supernormal growth rate (20%) for the next two years. After that, dividends are expected to grow at the firm's constant growth rate of 8%. The required rate of return is 18%. The present value of the stock is
a. $26.44 b. $23.03 c. $33.15 d. $40.01 e. $36.00
2. In the previous question, if IBM is currently selling for $40.00, then the stock is
a. undervalued by $13.56 b. overvalued by $13.56 c. correctly valued d. overvalued by $16.97 e. undervalued by $16.97
Lavender, Inc. announces a large stock dividend of 65% of the 3.1 million outstanding shares of common stock. The current price per share is $8.85. Par value of the stock is $0.01 per share. What effect does this dividend have on retained earnings?
Northland is a company that supplies turbines for hydro and wind power generation. A new customer has placed an order for 10 large capacity wind turbines which will increase the efficiency of their wind mills. The variable cost per unit is $13,000 an..
Reizenstein Technologies (RT) has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market.
A woman plans to work for 25 years and to make deposits into a retirement fund at the amount of 100 at the end of each month.
What taxable yield is equivalent to a municipal bond yield of 5.8 percent if a taxpayer has a marginal tax rate of 43 percent?
A project that provides annual cash flows of $17,300 for nine years costs $79,000 today. What is the NPV for the project if the required return is 8 percent?
Equation: x/y=a/b Out of the 10 natural numbers (1-10) if you draw 4 numbers at random what is the probability that the equation would be equal. (Example 2/2=3/3, 1/3=2/6 etc).
The Holmes Company's currently outstanding bonds have a 9% coupon and a 12% yield to maturity. what is Holmes's after-tax cost of debt?
How much profit will this firm earn when it produces the quantity of output that maximizes their profit?
Company XYZ has issued bonds that have a 6% coupon rate, payable semi annually. The bonds mature in 16 years, have a face value of $1,000, and a yield to maturity of 8%. What is the price of the bonds?
The Financial Services Authority (FSA) in the United Kingdom has long been regarded as one of the most successful regulator in the world.
Does the subjective approach to determining the appropriate discount rate for a project always lead the firm to make the right choice when accepting or rejecting a project? Please explain your answer.
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