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The dividend for Should I, Inc., is currently $1.25 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in four years. If you require a 15 percent return on the stock, what is the most you would pay per share?
Suppose an individual invests $20,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. If the investor reinvests the annual..
All of the following are features of bonds except
At the beginning of the year, a fund was established with an initial deposit of $1,000. As of March 1, the fund had risen to $1,020 and a withdrawal of $50 was make. By July, the value of the fund was $990 and an additional deposit of $70 was make. O..
A firm has a retention ratio of 49 percent and a sustainable growth rate of 7.80 percent. The capital intensity ratio is 1.73 and the debt-equity ratio is .84. What is the profit margin?
The trick here is just to calculate the price as the present value of future cash flows, just like in Chapter 6. Notice that the coupon payments) don't start immediately for one bond. You must adjust the present value equation for an annuity to refle..
A firm is about to double its assets to serve its rapidly growing market. It must choose between a highly automated production process and a less automated one. It also must choose a capital structure for financing the expansion.
Dave & Co. is replacing a machine because it has worn out. At the end of its 5 year life, the new machine will not affect either sales or operating costs and will not have a salvage value. The new machine will have a zero rate of return. The new mach..
Explain the problem of using a firm-wide weighted average cost of capital for individual projects AND explain how you would estimate the discount rate for these projects.
Should we base our decisions on which opportunities to pursue solely based on quantitative evaluation methods like NPV, IRR, MIRR, Payback, Real Options and others? Support your view.
A corporation with very high growth prospects and many positive NPV projects to fund may want to increase its dividend based on the: a. very low agency costs of the corporation b. information effect c. tax bias against capital gains d. residual divid..
Summarize call provisions and sinking fund provisions. Explain how these types of provisions individually make bonds more or less risky for a) an investor, and b) the issuer.
You have been tasked with evaluating two independent projects: a three-year lathe for the shop and a six-year machine press. Are the two estimates equally reliable? Why or why not?
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