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1. Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this stock is 9.00%. What is the best estimate of the stock’s current market value?
2. Department A has 120 hours of capacity, department B has 160 hours of capacity, and 90 meters of material are available. Each shirt contributes $10 to profits; each pair of shorts, $10; and each pair of pants, $23.(Let L = #shirts manufactured, let H = #shorts manufactured, Let P = # pants manufactured) Formulate the problem algebraically as a linear programming model. Solve this problem using Excel.
The constant dividend growth model is:
A lottery winner can take $6 million now or be paid $600,000 at the end of the next 16 years. The winner calculates the internal rate of revenue (IRR) of taking the money at the end of each year and estimating that the discount rate across this perio..
Walmart is considering opening a small experimental store in New York City. A store is expected to have a long economic life, but the valuation horizon is 15 years. The store in New York is likely to generate revenues of $34M in the first year and th..
The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..
Which of the following measures refers to a firm’s ability to convert revenues into operating cash flow?
You have $200,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 11.65 percent. Stock X has an expected return of 10.68 percent and a beta of 1.38, and Stock Y has an expecte..
Calculate the price of a 4-month European call option on a dividend-paying stock with a strike price of $30 when the current stock price is $34,
Due to a recession, expected inflation this year is only 3%. However, the inflation rate in year 2 and thereafter is expected to be constant at some level above 3%. Assume that the expectation theory holds and the real risk free rate (r*) is 2%. If t..
The land could be sold for $2,275,000 after-tax today. What is the net present value of the proposed plant?
Discuss “tax neutrality”? How do you see the capital structures and associated pricing change in the future comparing to the Capital Structure Theory:
Delta Company sells high-end laser printers for $5,000 each. They also offer the option to lease the printers for 5 years. The computers cost Delta $3,500 to manufacture. Determine the amount of the lease payments, as determined by Delta. Provide the..
Describe the benefits and risks of investing in the current Global market. Be specific concerning present world events and market reactions/trends.
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