What percentage of the value of the firm under policy ii is

Assignment Help Finance Basics
Reference no: EM13619774

A firm earns 1 million in year 0. Thereafter, it continues to earn 1 million a year in perpetuity. The financial manager of the firm is considering two choices regarding dividends:

i. Paying out all earnings as dividends, or

ii. Starting from year 0, investing 20% of its earnings each year in projects which earn 10% return

Assume that the opportunity cost of capital is 15%.

a. Under choice ii, how much dividends will be paid in year zero, year one, year two, year T.

b. What will be the value of the firm (year 0's dividends included) under policies i and ii?

c. What percentage of the value of the firm under policy ii is due to PVGO? How do you reconcile your answer with your result in part (a) which showed dividends growing over time.

Reference no: EM13619774

Questions Cloud

If the western shoreline is horizontally d2 240 m from the : an enemy ship is on the east side of a mountain island as shown in the figure. the enemy ship has maneuvered to within
What is the initial rate of mass loss of hydrogen by : gaseous hydrogen at 10 bars and 27c is stored in a 100-mm-diameter spherical tank having a steel wall 2mm thick. the
How much energy is lost due to friction during the water : a 16.0-kg enters a water slide that has a entrance 2.50 m above the ground exit. when the child exits her speed is 3.50
If the member is 1mm thick and the binary diffusion : a thin plastic membrane is used to separate helium from a gas stream. under steady-state conditions the concentration
What percentage of the value of the firm under policy ii is : a firm earns 1 million in year 0. thereafter it continues to earn 1 million a year in perpetuity. the financial manager
Yourco needs to raise 45000000 by selling bonds no internal : yourco needs to raise 45000000 by selling bonds no internal equity will be generated and yourco has a target capital
A single conducting loop of wire has an area of 80 10-4 m2 : a single conducting loop of wire has an area of 8.0 10-4 m2 and a resistance of 110 omega. perpendicular to the plane
The new owner thinks that inventories are excessive and can : lloyd inc. has sales of 650000 a net income of 39000 and the following balance sheetcash131560nbspnbspaccounts
Find the magnification for the object at distance 348 cm : a diverging lens has a focal length of magnitude 17.4 cm.a locate the images for each of the following object

Reviews

Write a Review

Finance Basics Questions & Answers

  Prepare a loan amortization schedule showing the interest

Loan amortization schedule Joan Messineo borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal, annual, end-of-year payments.

  Then defend the benefits gained from the main regulatory

write a paper responding to the following items1.defend the rationale for regulation within the commercial banking

  Your firm is contemplating purchase of the new 600000

your firm is contemplating the purchase of a new 600000 computer-based order entry system. the system will be

  What is the amount the firm should use as the initial cash

A new project will increase A/R by $18000, decrease A/P by $6000, increase fixed assets by $36000 and decrease inventory by $11000. What is the amount the firm should use as the initial cash flow atributable to net work capital?

  Determine the required rate of return on stock

Assume you are the money manager of a four million investment fund. The fund consists of four stocks with the following investments and betas:

  Ancelet co has identified an investment project with the

ancelet co. has identified an investment project with the following cash flows. if the discount rate is 10 percent what

  The determination of the value of an investment depends on

the determination of the value of an investment depends on knowing at least three of the following four variablesathe

  Compute the weighted cost of capital

Compute the weighted cost of capital that is appropriate to use in evaluating this expansion program

  Compare and contrast the main policies of the us federal

Compare and contrast the main policies of the US Federal Reserve and the European Central Bank over the last 10 years. Based on these policies, identify and contrast the main priorities of these institutions. How do these policies affect exchange rat..

  How might the company hedge or deal with this risk

For example, if an American firm wants to bring those profits back to the US to invest in a project, what risk does the company face?

  A local bank will pay you 152 a year for your lifetime if

a local bank will pay you 152 a year for your lifetime if you deposit 1900 in the bank today. if you plan to live

  Describe how the reporting of extraordinary items is

Describe how the reporting of extraordinary items is a good example of the shift away from finite uniformity to rigid uniformity in accounting standards.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd