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You are running a hot Internet company. Analysts predict that its earnings will grow at 40% per year for the next three years. Your company has just announced earnings of $2 million for the current year.
a. What is the present value of future earnings for the next three years if the interest rate is 8%? (Assume all cash flows occur at the end of the year.)
b. As competition increases, after the third year, earnings growth is expected to slow to 5% per year and continue at that level forever. The interest rate remains the same. What is the value of the company in three year. (Hint: first perpetuity payment occurs in year 4)
c. What is the present value of the company today?
The Houston Corp. needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000.
Examine the factors that determine the price of shares on the stock markets and analyze the changes in share prices over the last three years.
What is the market value of Australian Galaxy Cruises if they invest in PacificDream? What is the accounting rate of return (assuming the salvage value is equal to thebook value of the superliner in year 10)?
Twin Oaks Health Center has a bond issue outstanding with a coupon rate of 7% and four years remaining until maturity. The par value of the bond is $1000 and the bond pays interest annually.
A firm has inventory of $11,000, accounts payable of 9,800, cash of 850, net fixed assets of 12,150, long term debt of 9,500, accounts receivable of 6,600, and total equity of 11,700. What is the common size percentage for the net fixed assets? Ho..
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You expect to earn 6% annually on the account. How many years will it take to reach your goal? Round your answer to the nearest whole.
What is a private placement? How does it differ from a deal underwritten by an investment bank?
a company plans to pay 2 dividend per share one year from now and the dividends are expected to grow at 10 per year
Trident Corporation is currently worth $1,000,000. Its current debt-to-value (D/V) ratio is 40%. The company is confident in meeting its debt obligation, and wants to introduce more debt to take advantage of the tax shield of interest payment. It is ..
ABC private limited as given the dividend of $5 last year and has promised to increase the dividend by 8% each year for the next four years.
At a MARR of 7.5% per year, determine which should be selected, if they are ( a ) independent and ( b ) mutually exclusive.
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