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Differentiate between accrual accounting and cash basis
: Bob’s personal wealth including investments in land, stocks, and bonds is about $14,000,000. He reported an interest income of $20,000 and dividend income of $6,000 last year. The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for..
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Amortization schedule
: Set up an amortization schedule for a $42,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 6% compounded annually. Round all answers to the nearest cent. What percentage of the payment represent..
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Evaluating an extra dividend versus share repurchase
: Wally’s Penguins is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would be spent. Current earnings are $1 per share, and the stock currently sells for $27 per share. There are 2,500 shares outstanding. Ignore taxes an..
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Excess cash to complete a stock repurchase
: Remington’s has a market value equal to its book value. Currently, the firm has excess cash of $1,200, other assets of $5,800, and equity valued at $3,750. The firm has 250 shares of stock outstanding and net income of $420. What will the new earning..
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What is the firms cost of equity
: Tina Fashions is expected to pay an annual dividend of $1.10 a share next year. The market price of the stock is $21.80 and the growth rate is 4.5 percent. What is the firm's cost of equity?
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Debt to capital ratio-firm is in stable growth
: Caballos, Inc., has a debt to capital ratio of 27%, a beta of 1.3 and a pre-tax cost of debt of 5.7%. The firm had earnings before interest and taxes of $ 630 million for the last fiscal year, after depreciation charges of $ 234 million. Assume that ..
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An investment advisor is recommending bond
: If an investment advisor is recommending a bond that is essentially risk free, that is, a bond that is guaranteed by the US government (e.g. Ginnie Mae), does that advisor have an obligation to explain the investment risk to his/her client fully?
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New town instruments is analyzing proposed project
: New Town Instruments is analyzing a proposed project. The company expects to sell 2,100 inits, + or - 4 percent. The expected variable cost per unit is $270 and the expected fixed costs are $548,000. Cost estimates are considered accurate within a pl..
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Estimate the reinvestment rate
: Caballos, Inc., has a debt to capital ratio of 48%, a beta of 1.13 and a pre-tax cost of debt of 6.9%. The firm had earnings before interest and taxes of $ 636 million for the last fiscal year, after depreciation charges of $ 216 million. Assume that..
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