A rural telephone operator has a large number of landline customers. As the use of landline phones decline dramatically, the firm has decided to cut its dividend every year by 1.5% indefinitely (e. a negative growth rate). The most recent dividend the firm paid was $3.20 per share. Assuming a required rate of return of 8.2%, which of the following is the best estimate of the firm's current fair value? O $32.49 O $29.61 O $2624 O $32.99
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- Old Comm Corp. is an old company in an industry which is declining. You are trying to determine what a fair price for the company would be given these facts. You know the firm just paid a dividend of $3.01. You expect the industry to shrink by -13.3% a year and assume this can be used as the firm's growth rate. Your estimated discount rate for the firm is 10.996. Given your assumptions, what should be the price of Old Comm Corp.? Answer with dollars and centsBrushy Mountain Mining Companys coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the companys earnings and dividends are declining at the constant rate of 4% per year. If D0 = 6 and rs = 14%, what is the estimated value of Brushy Mountains stock?Ezekiel Enterprises recently made a large investment to upgrade its technology. Whilethese improvements won’t have much effect on performance in the short run, they areexpected to reduce future costs significantly. What effect will this investment have onEzekiel Enterprises’ earnings per share this year? What effect might this investment haveon the company’s intrinsic value and stock price?
- An unlevered firm perceives its optimal dividend policy to be a 40 percent payout ratio. Asset turnover is sales/assets = 80%, the profit margin is 10 percent, and the firm has a target growth rate of 5%. a. Is the firm's target growth rate consistent with it other goals? b. If not, how much does it need to increase asset turnover to achieve it goals? c. How much would it need to increase the profit margin instead?Edmund Enterprises recently made a large investment to upgrade its technology. Although these improvements won’t have much effect on performance in the short run, they are expected to reduce future costs significantly. What effect will this investment have onEdmund Enterprises’ earnings per share this year? What effect might this investment have on the company’s intrinsic value and stock price?Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 4% per year. If D0 = $5 and rs = 18%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent.
- Due to increasing competition, j Corporation has seen a steady year-to-year decline in its cash flows. Its revenues are predicted to be 1.10% lower than they were last year and costs are expected to increase due to higher input costs. Sluggish Corporation has just paid an annual dividend of $3.7 and this dividend is expected to decline by 4.0% per year. Investors require a 17.5% annual return. What is the current price per J Corporation share?Suppose the profitable company, Hermes, Inc., previously calculated its external financing needs (EFN) to be $18,200,000. What will happen to the EFN if management now decides to decrease the dividend payout ratio from 35.00% to 25.00%? (1) It will increase to some value greater than $18,200,000. (2) It will fall to some value lower than $18,200,000. (3) It will remain at $18,200,000. (4) The answer depends on Hermes, Inc.’s growth rate in sales. (5) The answer depends on Hermes, Inc.’s profit margin.The Coal Bin is in a downsizing mode. The company paid a P1.40 annual dividend last year. The company has announced plans to lower the dividend by P.20 a year. Once the dividend amount becomes zero, the company will cease all dividends and go out of business. You have a required rate of return of 18 percent on this particular stock given the company's situation. What is the minimum price you would like to receive if you were to sell your shares in this firm today? a. P1.54b. P2.78c. P0.70d. P3.87
- Even Better Products has come out with an even better product. As a result, the firm projects an ROE of 20% and it will maintain a plowback ratio of 0.30. Its earnings this year will be $2 per share. Investors expect a 12% rate of return on the stock. a) At what price an dP/E ratio would you expect the firm to sell? b) What is the present value of growth opportunities?Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?1. You want to invest in a company that guarantees your money's interest payments and returns at the maturity date as an investor. Which is the best option for this investment? 2. The ABC Incorporated paid a dividend of Php142.60 per share last year. Yesterday's last price is Php2,300 with the current yield of 6.2%. This problem is an example of _____. Suppose that you have a stable job and you are thinking about your family's future once you retire from your job. What is an appropriate investment for retirees? a. bonds b. stocks c. stocks and bonds d. neither stocks nor bonds