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You are looking to purchase some Sandy Olsson Corp. stock. You estimated that Sandy's beta is 1.3 and her tax rate is 30%. Currently the expected return on the market is 10% and the US T-bill is yielding 39%. What is the appropriate cost of equity?
The stock is currently trading at $30 per share. Last week, the stock paid a dividend of $2.
The dividends have been growing at 10% annually for the past 5 years. You expect this growth rate is not sustainable forever.
You only expect this rate to continue for 5 years. Then the growth should taper down to 3% per year thereafter. Should you buy the stock? Why?
A bond issued by Standard Oil worked as follows. The holder received no interest. At the bond’s maturity the company promised to pay $1,000 plus an additional amount based on the price of oil at that time. The additional amount was equal to the produ..
A young graduate looks to save money to buy a house 7.00 years from today. How much will his account be worth in 7.00 years?
Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 16.25 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?
Discuss some of the factors affecting the exchange rate. If you were elected to choose between a fixed, freely floating, or a dirty float exchange rate system, which would you choose for your home country? Why?
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $220,000 and sell its old low-pressure glueball, which is fully depreciated, for $40,000. The new equipment has a 10-year useful life and will sa..
Suppose you are committed to owning a $207,000 Ferrari. If you believe your mutual fund can achieve a 13 percent annual rate of return and you want to buy the car in 10 years on the day you turn 30, how much must you invest today?
On September 1, Jennings, a used-car dealer, wrote a letter to Wheeler, stating, “I have a 1955 Thunderbird convertible in mint condition that I will sell you for $13,500 at any time before October 9. On September 29, Wheeler accepted Jennings’s offe..
How would you respond to your CFO if she instructed you to use the IRR technique to make capital budgeting decisions on projects with cash flow streams that alternate between inflows and outflows?
The December 31, 2013, balance sheet of Schism, Inc., showed $153,000 in the common stock account and $2,780,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed $163,000 and $3,080,000 in the same two accounts, ..
How much more would they have to pay over the life of the loan from the higher interest rate?
Assume NEWC has an investment opportunity (similar to the air bag opportunity in Other People's Money).The firm can spend a product that will be sold in packets or units of twenty. Assume CF equals net income available to common stockholders plus dep..
Joey saved $750 per month for the last 54 months, received a 4.5% interest annually compounded on a monthly basis, how much does Joey have today in his account?
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