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Stephenson Technologies (ST) produces the world's greatest single-lens- refl ex (SLR) camera. The camera has been a favorite of professional photographers and serious amateurs for several years.
Unfortunately, the camera uses old fi lm technology and does not take digital pictures. Ron Stephenson, owner and chief executive officer of the company, decided to let the business continue for as long as it can without making any new research-and-development investments to develop digital cameras.
Accordingly, investors expect ST common stock to pay a $4 dividend next year and shrink by 10 percent per year indefinitely. What is the market price of ST stock if investors require a 12 percent return?
If a firm is exposed to a high degree of business risk as a result of its high operating leverage, then it probably should offset this risk by using a larger-than-average amount of financial leverage. This follows because debt has a lower after-tax c..
Mary Smith wants to buy a property for $250,000 and obtains an 80 percent loan. This loan can be obtained for 25 years at 5.75 percent interest (monthly payments) with two points charged on the loan. What dollar amount will the lender actually disbur..
Which one of the following types of loans requires periodic repayments, each of which reduces the principal balance?
Shadow Corp. has no debt but can borrow at 7.5 percent. The firm’s WACC is currently 9.3 percent, and the tax rate is 35 percent. What is the company’s cost of equity? If the company converts to 60 percent debt, what will its cost of equity be? If th..
Bond valuation Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your required return on Bond X is 11%; and if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5..
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. The company also has two bond issues outstanding. What are the company's capital structure weights on a book value ba..
Reviewing a project with projected sales of 895 units a year, plus or minus 5 percent. The estimated sales price is $79 a unit, plus or minus 3 percent. Variable costs are estimated at $42 a unit, plus or minus 2 percent, and the fixed costs are $19,..
At the end of the current year, a company is being sued for copyright infringement. The outcome of the lawsuit is uncertain because the lawsuit has not been settled, but the company believes it is reasonably possible that it may have to pay $1,000,00..
You believe that next year there is a 35?% probability of a recession and 65% probability that the economy will be normal. If your stock will yield negative −9?% in a recession and 23?% in a normal? year, what is the standard deviation of the? stock?
In 2016, a company purchases securities at a cost of $225,000. Their year-end value is $237,500. In 2017, these securities are sold for $230,000 and new securities are purchased for $305,000. At the end of 2017, the securities have not yet been sold,..
Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an Amazon Kindle for $350. The minimum payment on the card is only $10 per month. If Simon makes the minimum monthly payment and makes no other charg..
Banana Box Corporation has sales of $4370130; income tax of $397323; selling, general, and administrative expenses of $290597; depreciation of $378588; cost of goods sold of $2784698; and interest expense of $127186. Calculate the amount of the firm'..
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