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Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $2.5. You expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 30% during the second year (g1,2 = 30%). After Year 2, dividend growth will be constant at 6%. What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock? Do not round intermediate calculations. Round your answer to the nearest cent.
Sincere Stationery Corporation needs to raise $546,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 10.8 percent annual coupon rate and a 10-year maturity. The investors require a 7.2 percent rate of retu..
You are the Chairman of the Board of Directors, and you need to choose one of these schemes. Scheme one (Traditional): Let X denote the closing stock price at the time the stock option is granted. The stock option has 10 years until it expires worthl..
You purchase a put option on pounds for a premium of $.03 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date,
One year ago Clark Company issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065, and it now sells for $1,270. What is the expected capital gains (or loss) yield for..
Assume you make the following investment: a $10,000 investment in a 10year T-bond that has a yield of 10.5% and A $20,000 investment in a 10 year corporate bond with an Baa rating and a yield of 13.7%. Based on this information, what is your estimate..
How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?
A warrant is a long-term option from a company that gives the holder the right to buy a stated number of shares of the firm’s stock at a specified price for a specified length of time. Assuming that the warrants will not be exercised prior to expirat..
A 20 year bond with an annual coupon of 10% has a duration of 10 years and a convexity of 136. The YTM of the bond decreases from 8% to 7%. What is the actual percent change in bond price? What is the duration approximation of the percent change in b..
A firm is paying an annual dividend of $3.25 for its preferred stock selling for $57.00. There is a selling cost of $3.30. What is the after-tax cost of preferred stock if the firm's tax rate is 34%?
Large cap stocks had the nominal rates of return of 11.98%. The rate of inflation during the last year was 2.57 percent. What is the real rate of return for large cap stocks.
Recommend a strategy for financial administrators to balance the tension between having inventory on hand when it is needed versus the carry cost to the organization. Provide support for your recommendation.
Three general unsecured creditors are owed $45,000 as follows: Easy Does It Rentals, $15,000; Make Me a Deal Furniture, $5,000; and TV’s r Us, $25,000. After all other creditors are paid, the amount left for distribution to general unsecured creditor..
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