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Today Microsoft Corporation trades at $65.00/ shr. Your investment research shows an estimated dividend growth rate of 4.0% and the dividend is currently at $1.56/shr. The risk free rate is assumed to be 2.5% and the market's expected return is 6.9%.
Is the stock under- or overvalued at this price?
What if the forward dividend growth rate is more aggressively assumed at 4.7 % ?
Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 10% coupon debt outstanding might like to co..
The risk-free rate is 5 percent, the market risk premium is 7 percent, and the tax rate is 35 percent. What is the firm's WACC?
How should Leroux think about strategies for the future in an increasingly interdependent global financial system? Were the changes sustainable?
Suppose that you’re a FX trader for a bank in New York. You are faced with the following market rates: Is there a Covered Interest Arbitrage opportunity (CIA)? Explain why or why not.
A triple A rated company borrows $100 millions interest only loan for a 10 year period at fixed rate of 5.5 percent. Assuming the company is in the 35 percent tax bracket. What will be the present value of the tax shield over the ten year period assu..
Crazee Enterprises Corporation just paid a dividend and it expects that dividend to grow by 10 percent for the next three years. After that, the dividend is expected to grow at a constant rate of 5 percent in perpetuity. If the company's stock is cur..
The Medicine Cabinet has a return on equity of 18.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income?
Estimate the Sharpe ratio of each mutual fund According to the Sharpe ratio, which fund performed better.
Stock X has a beta of 0.9 and an expected return of 12%. Stock Y has a beta of 1.4 and an expected return of 16%. What is the risk-free rate if these securities both plot on the security market line?
An asset has had an arithmetic return of 10.5 percent and a geometric return of 8.5 percent over the last 94 years. What return would you estimate for this asset over the next 12 years? 18 years? 32 years?
To raise the equity multiplier, you may opt for which of the following:
When projecting growing cash flows into perpetuity, the estimate should take into account the extra amount required for investment consistent with any projected growth in operating profit. (True, False, Uncertain and explain your response)
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