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Vern plans to invest $100,000 in a growth stock, in year 0. The stock is not expected to pay dividends. However, Vern predicts that it will be worth $135,000 when he sells it in year 3. The $35,000 increase in value will be taxable at the preferential capital gains rate of 15 percent.
a. Using a 4 percent discount rate, calculate the net present value of after-tax cash flows from this investment. (Round discount factor(s) to 3 decimal places. Round your intermediate calculations and final answer to the nearest whole dollar amount.)
b. Which two of the four basic tax planning variables increase the value of Vern's investment?
What is the book value per share? What is the earnings per share?
Boon Teck has savings of $35,000 and shares worth $78,000. What is the additional amount of life insurance that Boon Teck needs?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $16.50 per share 9 years..
A few days later, John buys the stock at $44 per share and he also exercises the option. Determine John's net dollar gain per share.
Change in net working capital should always be positive. Free cash flow can never be negative. A negative cash flow to creditors indicates you must have paid off debt during the period. A negative cash flow to shareholders indicates you must have iss..
Suppose that you are the manager of a newly formed retirement fund. You are to set up a series of semiannual payments to accumulate a sum of $1,000,000 in ten years. What is the required semiannual payment, to the nearest dollar? Suppose that immedia..
Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.45%. What inflation premium (IP) is built into 5-year bond yields?
Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth.
Four months ago, you purchased 1,500 shares of Lakeside Bank stock for $21.20 a share. You have received dividend payments equal to $.60 a share. Today, you sold all of your shares for $22.20 a share. What is your total dollar return on this investme..
A firm has arranged for a lockbox system to reduce collection time of accounts receivable. Currently the firm has an average collection period of 43 days, an average age of inventory of 50 days, and an average payment period of 10 days. Calculate the..
What is one share of this stock worth today if the market rate of return on similar securities is 10 percent?
Newton Company is privately owned by four individuals. The company sells athletic shoes, clothing, and accessories. An existing piece of equipment that keeps breaking down must be replaced. Management has asked for your opinion about how to finance t..
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