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1. Shares of common stock of the Leafpad Co. offer an expected total return of 8.9 percent. The dividend is increasing at a constant 2.2 percent per year. What must be the dividend yield?
Enter rate in percents, to two decimal places.
2. Orca, Inc. announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $1.85 a share. The following dividends will be $1.5, $1.45, and $2.53 a share annually for the following three years, respectively. After that, dividends are projected to increase by 4.2 percent per year. How much are you willing to pay today to buy one share of this stock if your required rate of return is 12.6 percent?
3. You anticipate that XSensors Co. will pay a constant dividend of $2.75 each year for the next 10 years. After that, the dividend will increase to $4.89 and hold steady for another 10 years. After that, you expect the dividend will start increasing every year at a constant rate of 2.6 percent per year, forever. Your discount rate for this stock is 13.3 percent. How much are you willing to pay for this stock today?
If there is a security with a negative beta, for example -0.5, what can you say about the expected return of the security based on the Capital Asset Pricing Model (CAPM), or the Security Market Line (SML)? Would it be greater or smaller than the risk..
ABC Limited's required rate of return is 10%. The company is considering the purchae of three machines, as indicated below. Consider each machine independently. Machine A will cost $75,000 and have a life of 15 years. Its salvage value will be $3,000..
Suppose you know that a company’s stock currently sells for $65.60 per share and the required return on the stock is 10 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield.
Determine the annual financing cost of a loan under this arrangement if Odessa borrows the following amounts $300,000 and $250,000.
Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $6,100, $11,100, and $17,300 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has deter..
A factory forecasts to produce the following cash flows: Year 1 - $6516, Year 2 - $7000, Year 3 - $11400, Year 4 onward in perpetuity - $12000. If the cost of capital is 6%, what is the factory's present value?
The price of Corporation stock is expected to be $68 in 5 years. Dividends are anticipated to increase at an annual rate of 20 percent from the most recent dividend of $2.00. If your required rate of return is 16 percent, how much are you willing to ..
List and describe the four major financial statements.
Rekall Inc., the memory implant company, has 7 million shares of common stock outstanding and 100,000 semi-annual bonds. Dividends are paid annually and are expected to grow in perpetuity at 3%. The bonds sell for 94% of face value and have a 10.42% ..
Diversification occurs when stocks with low correlations of returns are placed together in a portfolio. Identify at least one type of firm that might exhibit low correlations of returns with the overall stock market? Explain why the correlations of t..
The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise funds as additional notes payable and use them to increase inventory. What will be the firm’s quick ra..
On January 1, 2015, Canden Company started to make annual deposits in order to accumulate $1,000,000 by January 1, 2019. This fund will earn annual interest of 9%. Required: What are the four annual deposits that Canden should make at the beginning o..
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