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Suppose a company has a net income of $1,000,000 and a plowback ratio of 40%. There are 50,000 shares of stock outstanding. The company plans to increase dividends by 22% each year for the next 2 year and then apply a 2.25% growth rate to dividends each year indefinitely. The required return is 13%.
a) What will this year's dividend be?
b) What should the stock price be today?
c) What is this year's dividend yield? What is this year's capital gains yield?
d) What will the stock price be in 2 years?
e) What will the dividend yield and captial gains yield be in 2 years?
On January 2d, 2014, Microsoft expects to ship 1,000,000 new X-Boxes from its US plant, which it will sell through EU dealers on 270-day terms at 250 Euro each. So Microsoft will receive payment from its dealers on September 28th, 2014.
Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has five years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the perc..
The June Bug has a $16,000,000 bond issue outstanding. These bonds have a 7 percent coupon, pay interest semi annually in perpetuity, and have a current market price equal to 98.6 percent of face value. The tax rate is 39 percent. What is the amount ..
Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt–equity ratio is expected to rise from 30 percent to 50 percent. The firm currently has $3.3 million worth of debt outsta..
Nally, Inc., is considering a project that will result in initial aftertax cash savings of $6.9 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt-equity ratio of..
A project is expected to create operating cash flows of $33,000 a year for three years. The initial cost of the fixed assets is $68,000. These assets will be worthless at the end of the project. An additional $4,500 of net working capital will be req..
In its 2009 annual report, the Coca-Cola Company reported sales of $30.99 billion for fiscal year 2009 and $31.94 billion for fiscal year 2008. The company also reported operating income (roughly equivalent to EBIT) of $8.23 billion in 2009 and $8.45..
Write a response arguing for or against the unique tax and regulatory treatment applied to credit unions. In making your argument, be sure to offer both positive arguments in favour of your position, and also counterarguments addressing the objection..
What are some ways in which a firm can improve its cash position - what are some ways that a firm can harm its cash position?
Explain why a large bank may be willing to accept higher average loss rates on loans it is able to credit score.
Financial Assessment of MK Robe-Stones Limited Business Plan.
The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..
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