Q: What is one share of this stock worth to you if you require a rate of return of 12 percent?
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A: The payback period is the time to recover the cost of the investment.
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A: Enterprise value = Market capitalization + Debt - Cash.=$121+$26-$63.=$84 Billion.
Q: What is the price per share of the company's stock?
A:
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A: Loans are paid by an equal payment that carries the payment for interest and payment for the loan.
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A: IRR, or Internal Rate of Return, is a financial measure utilized to assess investment profitability.…
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A: Given data:Strike Price (K) = $17.50Option Price (OP) when purchased = $0.85Stock Price (S) at the…
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A: Spontaneous financing sources means sources which acts as inflow of finances.These sources can be…
Q: 6. (3 points) Suppose Apple is considering expanding its product line to include the new electric…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: The annual percentage rate of interest is
A: The annual percentage rate (APR) is the true cost of borrowing money, including the interest rate…
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A: Variables in the question:Stock Y:Beta=1.4Expected Return=15.2%Stock Z:Beta=.7Expected…
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A: Portfolio building is the strategic construction and management of a collection of financial assets…
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A: market value refers to the cost at which the shares are being purchased or sold by the investors in…
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A: Required annual amount refers to the amount required to be deposited at regular intervals. For this…
Q: Suppose a stock has generated the following annual returns: 13.6%, -12.1% and 7.6%. What was the…
A: Average return= 0.091 / 3=0.03 or 3.00%YearReturn10.1362-0.12130.076Total0.091
Q: Required: a. Find the duration of a 7% coupon bond making annual coupon payments if it has three…
A: Duration= Sum of (Year * Cash flow * Pvf) / Sum of (Cash flow * Pvf)Pvf@i = 1/(1+i)^ni= interest…
Q: Darnell purchased a new power washer for his detail business but ended up selling it within 7…
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A: Since you have posted multiple questions, we will provide the solution only to the first question as…
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A: Investment in stock A: $138,000Investment in stock B: $142,000Beta of stock A: 0.83Beta of stock B:…
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Q: Face value Face value Price $800 5% $575 $1,000 6% $723
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Q: Suppose the following: Beginning Inventory = 11257 Ending Inventory= 12407 Beginning Receivables =…
A: Beginning Inventory = 11,257Ending Inventory= 12,407Beginning Receivables = 6167Ending Receivables =…
Q: An asset used in a 4-year project falls in the 5-year MACRS class, for tax purposes. The asset has…
A: Book value= (purchase price)*(1-sum of MACR rates from beginning to current date)= 20349349 *(1-(20%…
Q: You are considering a project with an initial cost of $8245 and a required return of 11.6%. What is…
A: The discounted payback period is the time to recover the cost of investment at a given discount…
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A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…
Q: Consider the following information: State of Economy Boom Good Poor Bust Probability of State- of…
A: portfolio is a combination of various components such as equity, preffered, debt, etc for the…
Q: Jerry Jeff, Inc. has 14,900 shares of common stock outstanding at a price per share of $77 and the…
A: The WACC of a company refers to the average profits that the company provides to all its…
Q: Advance Wear is merging with Swish. Advance Wear has debt with a face value of $80 and Swish has…
A: Total debt after merger =(80+40)=120After mergrer , combined value of firm = 120 + 60 = 180 or…
Q: By acting as the counterparty to every futures position, the exchange eliminates the A) market B)…
A: The correct answer to the question is "B) credit".Credit risk is the risk that there will be a…
Q: If the net present value of a project is zero based on a discount rate of 16%, then the internal…
A: The internal rate of return (IRR) is equal to 16%. Here's why:The net present value (NPV) is the sum…
Q: Zuni Computer Systems is considering a project with the following cash flow data. What is the…
A: YearCash flows0-12501450247034906.181%
Q: Blue Spruce Inc. is comparing several alternative capital budgeting projects as shown below: Initial…
A: The Profitability index is calculated by dividing the present value of future expected cash flows by…
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Q: Fama's Llamas has a WACC of 9.4 percent. The company's cost of equity is 13 percent, and its pretax…
A: WACC is also known as Weighted Average Cost of Capital. It includes the cost of debt & cost of…
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A: Unlevered cost of equity = 11%Growth in interest expenses = 5% after Year 3Tax rate = 25%Interest…
Q: 4. What is the project's net present value?
A: Net present value(NPV) is the difference between present value of all cash inflows and initial…
Q: Bakers Pride Corporation is considering purchasing one of two new mixing machines. Either machine…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: Kyle sold 2 one-year European $25 call and 3one-year European $22 put on Janssen stock. The call…
A: Call option premium earned= .70*100*2= 140Put option premium earned= 1.80*100*3= 540
Q: What discount rate sets the present value of the promised bond payments equal to the current market…
A: The correct option is Yield to Maturity.YTM is the total return an investor will earn by holding the…
Q: How many years would it take to obtain $20,000 if today $4,000 were deposited in a savings fund that…
A: Compound = Monthly = 12Future Value = fv = $20,000Present Value = pv = $4000Interest Rate = r = 2 /…
Q: If Finley wants to set aside money in a savings account that earns 3.72% APR in interest, compounded…
A: We can use the future value formula for compound interest to solve this problem:where:F: future…
Q: Problem 27-06 MACRS Depreciation and Leasing [LO3] You work for a nuclear research laboratory that…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
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- In recent years Constable Inc. has suffered losses, and its stock currently sells for only $0.50 per share. Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $21 per share. How many of the old shares must be given up for one new share to achieve the $21 price, assuming this transaction has no effect on total market value?You may attempt this question 2 more times for credit. Santos Unlimited (SU) was originally unlevered with 4600 shares outstanding. However, after a major financial restructure, SU now has $35000 of debt, with an annual interest expense of 11 percent. The restructuring has reduced the number of shares to 3700. A group of shareholders of SU are not convinced that this move towards adopting financial leverage is a good idea. Their main argument is that there is now some range of EBIT, however low, that will make the shareholders worse off than before. Help understand the situation better by computing the level of earnings before interest and tax (EBIT) that would make shareholders indifferent between being unlevered (i.e. not having any debt) and levered (i.e. having debt). Assume a 31 percent corporate tax rate. Answer: $ Place your answer to the nearest dollar without a dollar sign or a comma (if applicable).David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing. The company uses short-term debt to finance its temporary working capital needs, but it does not use any permanent (long-term) debt. Other solar technology companies have debt, and Mr. Lyons wonders why they use debt and what its effects are on stock prices. To gain some insights into the matter, he poses the following questions to you, his recently hired assistant: Now assume that Firms L and U are both subject to a 25% corporate tax rate. Using the data given in part b, repeat the analysis called for in parts b(1) and b(2) using assumptions from the MM model with taxes.
- David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing. The company uses short-term debt to finance its temporary working capital needs, but it does not use any permanent (long-term) debt. Other solar technology companies have debt, and Mr. Lyons wonders why they use debt and what its effects are on stock prices. To gain some insights into the matter, he poses the following questions to you, his recently hired assistant: d. Suppose that Firms U and L have the same input values as in Part c except for debt of 980,000. Also, both firms have total net operating capital of 2,000,000 and both firms are expected to grow at a constant rate of 7%. (Assume that the EBIT in part c is expected at t = 1.) Use the compressed adjusted present value (APV) model to estimate the value of U and L. Also estimate the levered cost of equity and the weighted average cost of capital.David Lyons, CEO of Lyons Solar Technologies, is concerned about his firm’s level of debt financing. The company uses short-term debt to finance its temporary working capital needs, but it does not use any permanent (long-term) debt. Other solar technology companies have debt, and Mr. Lyons wonders why they use debt and what its effects are on stock prices. To gain some insights into the matter, he poses the following questions to you, his recently hired assistant: Who were Modigliani and Miller (MM), and what assumptions are embedded in the MM and Miller models?Using the information below, answer questions 13 to 14. Wyatt Oil, an all-equity financed firm, has just reported EPS of $4.00 per share. Despite an economic downturn, Wyatt is confident regarding its current investment opportunities, but due to the current financial crisis, Wyatt does not wish to fund these investments externally. Wyatt's board has therefore decided to suspend its stock repurchase plan and cut its dividend to $1 per share (from its current level of $2 per share) and retain these funds instead. The firm just paid its current dividend of $1.00 per share and expects to keep its dividend at $1 per share next year as well. In subsequent years, it expects its growth opportunities to slow, and it will still be able to fund its growth internally with a target 40% dividend payout ratio, and reinitiating its stock repurchase plan for a total payout rate of 60%. All dividends and repurchases occur at the end of each year. Wyatt's existing operations are expected to generate the…
- Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 51.5% debt (wd) by issuing bonds and using the proceeds to repurchase and retire some common shares so the percentage of common equity in the capital structure (wc) = 1 – wd. Given the data shown below, by how much would this recapitalization change the firm's cost of equity, i.e., what is rL - rU? Do not round your intermediate calculations. Risk-free rate, rRF 5.00% Tax rate, T 25% Market risk prem, RPM 4.00% Current wd 0% Current beta, bU 1.20 Target wd 51.5% 4.78% 3.06% 4.40% 3.63% 3.82%Viable Enterprises, Inc. is seeking to float a new bond to pay for an expansion of the firm into the Midwest. However, some directors fear that the increase in bankruptcy risk might be greater than any benefits from Viable expanding into new markets. You have been tasked by the CFO with estimating current bankruptcy risks, and you have decided to start by calculating some simple default models. Shares outstanding for Viable are 0.53 million, and market price per share is $10.98. Using the table below, what is the Altman Z-Score (show 2 decimal places)? Current Assets Total Assets Current $12,414 EBIT $5,804 Retained $43,416 $17,028 Earnings $8,467 Liabilities Total $14,459 Liabilities Sales $98,769(Calculating the ex-dividend stock price) Kingwood Corporation has a stock price of $115.62 per share and is contemplating the payment of a large, one-time cash dividend of $40.39 per share. The underlying motivation for the large payout comes from management's belief that the firm has more cash than it can profitably reinvest and that keeping the cash will adversely affect the incentives of the workforce to strive to create shareholder value. Consequently, the firm's management decided to pay the large cash dividend. What do you think the ex-dividend-date price of the company's shares will be? If the firm's management is right about the stimulating effect of disgorging cash, do you think that the drop in stock price after the ex-dividend date will be smaller than otherwise expected? a. The ex-dividend date price of the company's shares will be $ : (Round to the nearest cent.) b. If the firm's management is right about the stimulating effect of disgorging cash, do you think that the…
- The common stock and debt of XYZ Co. are valued $60 million and $40 million respectively. Currently cost of equity of the company is 18% and its cost of debt is 9%. If the company issues an additional $20 million of common stock and uses all of this cash to retire debt, what will be the new required rate of return on company’s equity? Assume change in leverage does not affect risk of debt and there are no taxes.The management of Blanche Inc. controls 58% of the company’s stock. The firm did not meet any of its quarterly sales projections for the last year. Some of the firm’s institutional investors are worried that the firm’s poor performance is partly because management has not been focused on maximizing shareholder wealth. Which of the following measures would the institutional investors most likely want to see implemented? They would want to make sure the company has a restricted voting rights provision. They would want to make sure the company’s charter contains a shareholder rights provision. They would want the company to ban targeted share repurchases.Quinlan Electrical has quite a few positive NPV projects from which to choose. The problem is that it has more of these projects than it can finance without issuing new stock and the board of directors refuses to issue any new shares in the foreseeable future. Quinlan's projected net income is $150.0 million, its target capital structure is 25% debt and 75% equity, and its target payout ratio is 65%. The CFO now wants to determine how the maximum capital budget would be affected by changes in capital structure policy and/or the target dividend payout policy. Versus the current policy, how much larger could the capital budget be if (1) the target debt ratio were raised to 75%, other things held constant, (2) the target payout ratio were lowered to 20%, other things held constant, and (3) the debt ratio and payout were both changed by the indicated amounts.
