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Sparkling Water, Inc., expects to sell 2.90 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.75 in real terms and will cost $1.00 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 3 percent annually, while real costs will rise at a real rate of 2 percent annually. The real discount rate is 10 percent. The corporate tax rate is 35 percent.
What is Sparkling worth today? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1, 234, 567.) Value of the firm $ ____
A stock is now selling for $100. Each month it will either increase or decrease in value by 10% (u = 1.1, d = 0.9). The riskless rate with annual compounding is 12.682503% per year. Note that 1.12682503 = 1.0112. Draw the tree of values for the stock..
ABC Corp. has just paid a dividend of $0.26. ABC has an annual required return of 12%. If dividends are annual and expected to be constant, what is the intrinsic value (fair price) of ABC stock? What is ABC's dividend yield? A different analyst think..
After discovering a new gold vein in the Colorado Mountains, CTT Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulphuric acid extraction, a process that results in environ..
If the exchange rates are $1.50 = £1 and ¥100 = $1, what are the real exchange rates between the dollar and the yen and the dollar and the pound?
IBM’s stock is currently selling at $ 11.44. This year the firm had earnings per share of $2.80 and the current dividend is $ 0.68. Earnings are expected to grow 7% a year in the foreseeable future. The risk free rate is 10 percent and the expected m..
Enterprises originally sold bonds in 2011 with a 15 year maturity, $1000 par, 6% coupon paying annual interest. It is now 2015 and 4 years later. Bonds of similar risk selling at par know have a 5% coupon rate. What price would bond investors be will..
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer, purchased just 2 years ago, is being depreciated on a straight-line basis and has 6 years of remaining life.
Federated Holdings recently issued $90 par-value preferred stock that pays a 7% dividend rate per year.- What is the intrinsic value of this preferred stock?
Pretty Lady Cosmetic Products has an average production process time of forty days. Finished goods are kept on hand for an average of fifteen days before they are sold. Determine the average investment in accounts receivable, inventories, and account..
Explain why increased regulatory capital requirements lead to a greater consolidation of banking firms via mergers and acquisitions.
The marketing process does not take place automatically. It requires that certain marketing functions or activities be performed by various marketing institutions - and by consumers themselves. Discussion Name a product for which all eight marketing ..
Explain the likely interest rate conditions that would cause these premiums. Does this ensure that covered interest arbitrage is worthwhile?
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