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1) A security analyst has forecast the dividends of Hodges Enterprises for the next three years. His forecast is: D1 = $1.50; D2 = $1.75; D3 = $2.20. He has also forecast a price in three years of $48.50. The rate of return for similar-risk common stock is 14%. What is the value of Hodges common stock?
2) The dividend paid this year (D0) on a share of common stock is $10. If dividends grow at a 5% rate for the foreseeable future, and the required return is 10%, what is the value of the stock today? Last year (date t = -1)? Next year (date t = 1)?
3) The current price of a stock (P0) is $20 and last year’s price (P-1) was $18.87. The last dividend (D0) is $2. Assume a constant growth rate (g) in dividends and stock price. What is the stock’s return for the coming year?
4) A company pays a current dividend (D0) of $1.20 per share on its common stock. The annual dividend will increase by 3% and 4%, respectively, over the next two years (D1, D2), and by 6% per year thereafter. The appropriate discount rate is 12%. What is P0?
Your friend has a trust fund that will pay him $623 at the end of 6 years. How much would you be willing to lend under these terms?
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 9 years ago. The bond currently sells for 89 percent of its face value. The book value of the debt issue is $16 million. The company's tax rate is 31 percent. What is the company's to..
A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?
Silver Bear Golf (SBG) is a manufacturer of top quality golf clubs with a specialty of putters. Currently, each putter they sell brings in $240 of revenue at a cost of $160. This past year, they sold 1,300 putters and they expect this number to grow ..
A 3.60 percent coupon municipal bond has 14 years left to maturity and has a price quote of 95.45. Compute the bond’s current yield.
Chamberlain Corp. is evaluating a project with the following cash flows: The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods.
A project is expected to create operating cash flows of $24,000 a year for three years. The initial cost of the fixed assets is $50,000. These assets will be worthless at the end of the project. An additional $2,500 of net working capital will be req..
On Jan 19th, the three-month forward rate for the Singaporean dollar (SGD) to New Zealand dollar (NZD) was SGD1.0260/NZD. At the same time, the spot rate was SGD 1.0180/NZD. A deranged scientist located in New Jersey had a hunch that the spot rate wi..
What is the minimum cash flow that could be received at the end of last two years (9 and 10) to make the following project acceptable? initial cost= 100,000 cash flows at end of years one through four= 10,000 cash flows at end of years 5-8= 20,000 op..
The stock will pay a dividend of $1.85 in two months. What is the price of a put option with the same exercise price?
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7.2 percent and a standard deviation of 10.2 percent. The risk-free rate is 4.2 percent, and the expected return on the market portfolio is 12.2 percent...
Richard is using the capital retention approach to determine how much life insurance to purchase. Richard would like to provide $45,000 per year to his family, forever, if he dies. If life insurance proceeds can be invested to earn a 5 percent annua..
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