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1. A stock’s beta is .84, the tax rate is 31%, and the market risk premium is 5.2% per year. The company’s common stock has a market value of $42.71 per share and its last dividendiwas $1.98 per share. The yield to maturity for the company’s long-term debt is 9.1% per year. The company's dividends are expected to grow at a forever constant rate of 5.5% per year. If the flotation costs for common stock are 6%, what is the company's annual cost of common stock financing?
2. A stock’s beta is .87, the tax rate is 31%, and the market risk premium is 5.9% per year. The company’s common stock has a market value of $78.43 per share and its next dividend is expected to be $6.09 per share. If the company's dividends are expected to grow at a constant rate of 7.1% per yearand the tax rate is 39% , what is the company’s annual cost of internal equity financing?
You have $500 to invest. You decide to open a margin account with your brokerage. What was your rate of return on this investment?
Create a college savings plan for your 3 year-old son. Assume that he will begin college in 15 years. You plan to pay for 4 years of college at $17,000 per year (tuition is due at the beginning of each year). What will it take to fund it via a lump s..
Research the nature of risk using various academic sources on the internet - discuss how it is resolved by investors and their advisors).
Dividends may be paid in cash or stock. A cash dividend reduces a corporation's cash and retained earnings. A stock dividend does not affect corporation's cash or equity
A firm with dollar revenues is considering borrowing $22 million (or the equivalent) for 5 years. They are considering procuring a 5 year loan with annual installment (amortizing) payments. If they decide to borrow in pounds, which alternative is lik..
Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the equipment for $1,500,000 it will depreciate it over 5 years, using straight-line depreciation. Calculate the cost of pu..
Suppose a risk-averse investor can choose a portfolio from among N assets with independently distributed returns, all of which have identical means [E(Ri) = E(Ri )] and identical variances (al = ol). - What will be the composition of his optimal p..
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $700 per set and have a variable cost of $200 per set. The company has spent $137,000 for a marketing study that determined the company will sell 56,000 sets per year ..
A proposed cost-saving device has an installed cost of $650,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $47,000, the margi..
Alson needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next 7 years, and you've decided to bid on the contract. Calculate all other cash flows except the OCF related to the contrac..
Use the loanable funds approach to show the impact of the U.S. budget deficit on the world real interest rate, holding all else constant.
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..
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