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You own 5,000 shares of stock in a firm. You will receive $4 per share dividend in one year. in two years the firm will pay a liquidating dividend of $60 per share. The required return on the company's stock is 16 percent. Ignore taxes, transaction costs, and other imperfections.
a. Find the current share price of the stock.
b. If you would rather have equal dividend on each of the next two years. Show how much you can achieve this by creating homemade dividends.
What is the amount of cash flow you would receive from your strategy in the second year?
c. Suppose you want only $8,000 total in dividends the first year. What will your homemade dividend be in two years?
Suppose the spot and six-month forward rates on the South Korean won are SKW 1,304.98 and SKW 1,314.82, respectively. The annual risk-free rate in the United States is 3 percent, and the annual risk-free rate in South Korea is 6 percent. What must th..
Your company is considering a new project that will require $855,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $144,000 using straight-line depreciat..
You are trading a centain futures. You purchased 2 contracts today. The purchase price of the futures per one contract was $75. The contract size of the futures per contract is 200. Suppose, next day, the price of the futures declined to $70. What ha..
If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers
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A retail coffee company is planning to open 95 new coffee outlets that are expected to generate $16.3 million in free cash flows per year,
The IRS is revaluating the asset life categories used for ACRS depreciation. The trucks that JK Industries use are currently classified by the IRS as having an asset life of 7 years. Because these trucks actually last for 10 years, the firm’s manager..
Josie's Craft Shack has a beginning cash balance for the quarter of $1,057. The store has a policy of maintaining a minimum cash balance of $1,000 and is willing to borrow funds as needed to maintain that balance. Currently, the firm has a loan balan..
An unlevered firm has a cost of capital of 11.3 percent and a tax rate of 34 percent. The firm is considering a new capital structure with 60 percent debt. The interest rate on the debt would be 7.25 percent. What would be the firm's levered cost of ..
Describe at least two (2) advantages and two (2) disadvantages of selling your home yourself instead of hiring a realtor.
Calculate the covariance between portfolio A, which has 10% in asset 1 and 90% in asset 2, and portfolio B, which has 60% in asset 1 and 40% in asset 2:
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