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1. Sammy is the CEO of Company XYZ. He estimates that the risk premium should be 4.5%. Company XYZ's bonds yield 9.25%. Using the bond-yield-plus-risk-premium approach, what is the firm's cost of equity?
2. Company XYZ's stock sells for $30.00; its next expected dividend is $1.55; and analysts expect its growth rate to be 4.25%. Based on the DCF method, what is the minimum rate of return that should be earned on retained earnings to justify plowing earnings back into the business rather than paying them out to shareholders as dividends?
3. Assume that in today's market, rrf = 4.25%, the market risk premium is RPM = 4%, and Company XYZ's beta is 1.02. Using the CAPM approach, what is Company XYZ's estimated cost of equity?
Publicity in the media can impact a firm’s financial performance. The terms income, earnings, and profit are used interchangeably.
An investor is trying to lock her wealth in a bank for the next few years.
Assume the following information concerning two stocks that make up an index. What is the price-weighted return for the index?
Given the following data for a particular product calculate the optimal service level. Sales response rate is 0.15% change in revenue for a 1% change in the service level (fill rate). Trading margin is $14 per item; inventory-carrying cost is 30% per..
There are major differences in parent and subsidiaries of MNCs not limited to exchange rate movements, remittances, tax differences and remitted earnings.
The cost of issuing and selling the preferred stock is expected to be rm5 per share.preferred stock can be sold under these terms.
Bond J has a coupon rate of 6 percent and Bond K has a coupon rate of 12 percent. Both bonds have 15 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 2 percent, what is the percentage price ..
Perform sensitivity analysis to analyze the effect of expenses on the project’s NPV and IRR. In your analysis, allow costs to vary between $0 and $100,000, in $5,000 increments. Use Goal Seek to find what level of expenses Lewis Industries needs to j..
The common stock of Leaning Tower of Pita Inc., a restaurant chain, will generate payoffs to investors next year, which depend on the state of the economy, as follows: The company goes out of business if a recession hits. Calculate the expected rate ..
Bond value and changing required returns. Find the value of the bond if the required return is? 13?%,17?%, and ?10?%.
Imagine that you are a financial manager. Determine three key drivers for evaluation when considering whether to invest in the futures market, indicating your likelihood to do so. Provide support for your rationale.
Assume that real risk-free rate is 2.1% and that maturity risk premium is zero. using geometric average. What inflation rate is expected during Year 2?
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