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The stock of Geo Company sells for $42.50, most recent dividend was $1.25. A flotation cost of 10% would be required to issue new common stock. Security analysts are projecting that the common dividend will grow at a rate of 7% a year. The yield on 10 year Govt. bond is 4.00% and 3-month T-bill is 2.00%. The beta for Geo's stock is 1.10 and the expected stock market return is 10.50%. The appropriate bond risk premium is 4.0% for the bond-yield-plus risk premium approach. The yield on Geo Company's bond is 5.50%.
What is Geo's cost of equity from retained earnings using the bond yield plus risk premium approach?
The company's weighted cost of capital (WACC)
Is the DCF approach or the market multiple approach best for valuing a business? Are there conditions when one approach is preferred over the other?
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Assume that the average firm in your company's industry is expected to grow at a constant rate of 5%, and its dividend yield is 4%.
Preferred stockholders do not participate in the receivings of the corporation beyond the stated rate in the way that common stockholders do.
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1 the authors state that empirical tests of purchasing power parity have for the most part not proved ppp to be
Compute the profit of the strategy at maturity with respect to different realizations of the stock price in the future and plot the profit diagram of the strategy.
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