The required return equal to the expected return

Assignment Help Financial Management

Reference no: EM131938918

1. Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $3.10 coming 3 years from today. The dividend should grow rapidly—at a rate of 31% per year—during Years 4 and 5. After Year 5, the company should grow at a constant rate of 7.0% per year. If the required return on the stock is 11.1%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)?

$90.09

$138.84

$144.16

$111.20

2. Dan is comparing three machines to determine which one to purchase. The machines sell for differing prices, have differing operating costs and machine lives, and will be replaced when worn out. Which one of the following computational methods should Dan use as the basis for his decision?

A- Bottom-up operating cash flow.

B- Internal rate of return.

C- Depreciation tax shield.

D- Equivalent annual cost.

E-Net present value.

Reference no: EM131938918

Questions Cloud

Evaluation of succession planning at audit office of guyana : An evaluation of succession planning at the Audit Office of Guyana - Describe the problems in the company - Explain the benefits to the company

Write a function that returns the largest of five floating : Draw a flowchart that takes 10 integers from a user and checks whether that the numbers are even or odd and displays the result.

Supply specialized parts to auto industry : A college friend started a small manufacturing concern about 15 years go to supply specialized parts to the auto industry.

What is accrued interest : If the coupon rate for this corporate bond is 6% and the par value of the issue purchased is $1,000, what is the accrued interest?

The required return equal to the expected return : what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)?

What is your tax liability : How much did you earn, both in total and percentage, and what is your tax liability?

What is the exact expression for the density for x : (a) Verify that X is geometric. What is "success" in this experiment? What is the numerical value of p? (b) What is the exact expression for the density for X?

What was the return on your invested capital : After taking this class you fancy yourself savvy commodities investor and take job on Chicago Mercantile Exchange. what was the return on your invested capital?

What geometric property fails : Let X denote the number of transmission errors per 128-bit message sent. Is X geometric? If not, what geometric property fails?

User Account

All Pages