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Constant growth You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.00 a share at the end of the year (D1 = $2.00) and has a beta of 0.9. The risk-free rate is 5.1%, and the market risk premium is 6.0% Justus currently sells for $28.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is Ps?) Round your answer to two decimal places. Do not round your intermediate calculations.
DAR Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 175,000 shares of stock outstanding.
If Northern Sludge issues an additional $11 million of common stock and uses this money to retire debt, what happens to the expected return on the stock?
Suppose the dividends for the Seger Corporation over the past six years were $1.51, $1.59, $1.68, $1.76, $1.86, and $1.91, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method.
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 78,000 2 91,000 3 105,000 4 100,000 5 81,000 Production of the implants will require $1,570,000 in net working capital to sta..
Grateway Inc. has a weighted average cost of capital of 11.5 percent. what is the company’s growth rate?
Identifying the errors made by Linton in their project appraisal and calculating the weighted average cost of capital for Everest.
You are the chief financial officer of a large multinational company; and six months from now you will be receiving a settlement payment of $50 million, which you plan to invest in 10-year U.S. Treasury bonds. Briefly describe the hedging strategy us..
Johnson Jets is considering two mutually exclusive projects. Project A has an up-front cost of $122,000 (CF0 = -122,000), and produces positive after-tax cash inflows of $30,000 a year at the end of each of the next six years. Compute the equivalent ..
Discuss performance measures and how they could positively or negatively impact your recommendations.
The D.J. Masson Corporation needs to raise $700,000 for 1 year to supply working capital to a new store. Masson buys from its suppliers on terms of 3/10, net 90, and it currently pays on the 10th day and takes discounts. However, it could forgo disco..
Bond Valuation-In 2013, Carnival Cruise Lines decided to sell some new bonds (something about fixing a big ship). They sold the bonds for $1,000 (face value) with a 20 year maturity and an 8% coupon. Two years have passed. Interest rates on similar b..
Suppose you are a stockbroker, who has just sold a new client 500 shares of a stock your brokerage recommends.
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