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Use the following information to answer questions 1 and 2 RTR stock, of which you own 500 shares, will pay a $2 per share dividend one year from today. Two years from now RTR will close its doors and stockholders will receive a liquidating dividend of $17.5375 per share. The required rate of return on RTR stock is 15 percent.
1. If the firm was to immediate pay the $2 dividend, what the price of the stock be?
(a) $13.26
(b) $11.26
(c) $15.26
(d) $9.26
(e) $14.26
2. Transaction cost issues are important when considering doing an IPO. What do we mean by “transaction costs”?
(a) costs of paying executives
(b) costs of paying employees
(c) costs of paying investment banks
(d) costs of paying commercial banks
(e) none of the above
Weyerhaeuser, forest products producer, traded at $42 at the beginning of 1996. Beta services typically place its beta at 1.0 with a market risk premium of 6 %.
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You obtain the following information concerning a stock, a call option, and a put option. What is the cash inflow or outflow from your position? What is profit or loss if the price of the stock stagnates and trades for $42 after three months? What is..
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Consider relative purchasing power parity (PPP) and remember the consumer price index (CPI) provides the price level in a country at any point in time.
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For each of these situations, determine the savings amount. Use the time value of money tables in Exhibit 1-A, Exhibit 1-B, Exhibit 1-C. What would be the future value of a savings account started with $700, earning 10 percent (compounded annually) a..
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Determine the compounding frequency of each card. Determine the percent of your budget that goes to pay previous total.
Buying points is a popular mortgage option, where you pay 1% of the mortgage price in return for a small interest rate drop,
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