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Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects sales and dividends to grow at a rate of 20% for the next 4 years, after which competition will probably reduce the growth rate in sales and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.20, required rate of return on the stock is 9.60%. What is the current price of the common stock?
Gardial GreenLights, a manufacturer of energy efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $20 million investment in new machinery.
What should be the forward price so that there is no arbitrage opportunity?
A) Assume the following: Euro spot = Euro 0.8115/$1.00; SwF spot = SwF 1.4260/$1.00; and Euro/SF spot = Euro 0.5625/SwF 1.00. Assume you have $1,000,000 available for arbitrage transactions. Show how you can make arbitrage profits at these spot rates..
Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities: What is the project’s expected NPV assuming average risk?
A share trades at a price-to-book ratio of 0.8. Explain whether his recommendation agrees with his forecast.
One year ago, you purchased 100 shares of Best Wings stock at a price of $49.65 a share. The company pays an annual dividend of $.64 per share. Today, you sold for the shares for $43.30 a share. What is your total percentage return on this investment..
Assume that the annual U.S. return is expected to be 7% for each of the next 4 years, while the annual interest rate in Mexico is expected to be 20%. Determine the appropriate 4 year forward rate premium or discount on the Mexican peso which could be..
We will derive a two-state put option value in this problem. Data: S0 = 290; X = 300; 1 + r = 1.1. The two possibilities for ST are 330 and 180. a. The range of S is 150 while that of P is 120 across the two states. What is the hedge ratio of the put..
Create your own example of Capital Expenditure From any chosen company. Describe and provide an approximate value of the initial cash flow. Describe and provide an approximate value of the annual cash flows. Provide an estimation of the life of the p..
With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a “surf lifestyle for the home.” With limited capital, they decided to focus on surf print table and floor la..
We are examining a new project. We expect to sell 5,100 units per year at $65 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $65 × 5,100 = $331,500. If success and failure are equally lik..
A stock has an expected return of 15.9 percent, the risk-free rate is 6.35 percent, and the market risk premium is 7.4 percent. What must the beta of this stock be?
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