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Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 4% and the market risk premium is 8%. Van Buren currently expects to pay a year-end dividend of $1.85 a share (D1 = $1.85). Van Buren's dividend is expected to grow at a constant rate of 5% a year, and its beta is 0.5. What is the current price of Van Buren's stock? Round your answer to the nearest cent.
All the following statements concerning the tax implications of a gift made to a person who dies within one year of receipt of the gift are correct EXCEPT:
Waller Co. (WAG) paid a $0.164 dividend per share in 2003, which grew to $0.420 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 14.0 percent? (Round the growth rate, g..
Suppose you borrow a large sum of money to buy a house, and you will pay back the loan over thirty years making fixed monthly payments. After fifteen years have passed, will you have paid off half the principal, more than half, or less than half? Why..
Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.10 and 0.18, respective..
When preparing capital budgeting analysis for a new project, Chris Johnson, a chief financial officer at BT Industries, faced a dilemma. The project involved a production of new type of shipping containers, which were significantly more durable and h..
The 3 month euro dollar futures price for a contract maturing in 6 years is quoted as 95.20. The standard deviation of the change in the short-term interest rate in 1 year is 1.1%. Estimate the forward LIBOR interest rate for the period between 6.00 ..
For which of the following investments is the date of maturity known?
Calculating Cost of Preferred Stock. Sixth Fourth Bank has an issue of preferred stock with a $6.25 stated dividend that just sold for $108 per share. What is the bank’s cost of preferred stock?
You are asked to evaluate two machines. The benefits from ownership are identical. Machine A costs $300 to buy and install, lasts for 5 years, and costs $160 per yea to operate. Machine B costs $500, lasts for 7 years, and costs $120 per year to oper..
An investor purchases a stock for $45 and a put for $.85 with a strike price of $41. The investor sells a call for $.85 with a strike price of $54. What is the maximum profit and loss for this position? (Loss amount should be indicated by a minus sig..
What can be said about first-order autocorrelation given the Durbin-Watson value of 1.8911 calculated from the three factor model residuals?
On average, your firm sells $25,800 of items on credit each day. The firm's average operating cycle is 35 days and it acquires and sells inventory, on average, every 18 days. What is the average accounts receivable balance? A firm sells 14,200 units ..
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