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Plank’s Plants had net income of $6,000 on sales of $70,000 last year. The firm paid a dividend of $600. Total assets were $300,000, of which $150,000 was financed by debt.
a. What is the firm’s sustainable growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
b. If the firm grows at its sustainable growth rate, how much debt will be issued next year? (Do not round intermediate calculations.)
c. What would be the maximum possible growth rate if the firm did not issue any debt next year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Fly Away, Inc., has balance sheet equity of $6.5 million. If the benchmark PE ratio is 29, what is the target stock price in one year?
A fleet manager must choose between two trucks to purchase for a company's fleet. The company will keep either truck for 4 years. Truck A costs $28,000 and has a market value of $16,000 after 4 years. Truck B costs $33,000 and has a market value of $..
Calculate the value of a call option on the stock with an exercise price of 250.
How does your answer relate to the efficient market hypothesis?
estimate the stock price for Yahoo- and provide the analysis as requested. - Using the same peers and industry data, estimate Yahoo! WACC.
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.53 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $8.90, but management expects to reduce the pay out by 4 percent per year indefinitely. If you require a return of 14 percent on this stock, what will you pay for a sha..
Cuts has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent, and its pretax cost of debt is 8.2 percent. If the tax rate is 34 percent, what is the company's WACC? Assume an opportunity cost of 10%, what should you do under the tra..
Additionally, stockholders' required return is 12.2%, and the firm's tax rate is 40%. What is the company's WACC based on market value weighting?
The following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Assume the index is scaled by a factor of 10 million..
Using spot and forward exchange rates: The spot exchange rate for the Canadian dollar (CAD) is 1.14 CAD and the six-month forward rate is 1.17 CAD.
What is the standard way to calculate a company’s cost of capital? And what important observations have been offered by finance theory when estimating a firm’s WACC?
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