A Company Is Planning To Issue New Common Stock. The Expected Dividend Next Year

A company is planning to issue new common stock. The expected dividend next year is $2.50, and the expected sales price is $35.00. The company’s earnings are expected to grow at a constant rate for the foreseeable future. The return on S

The Gecko Company And The Gordon Company Are Two Firms That Have The

The Gecko Company and the Gordon Company are two firms that have the same business risk but different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 8 percent. Suppose the capital gains tax rate is zero, whereas the income tax rate is 35 percent. Gecko has an expected earnings growth rate of 19 percent annually, and its stock price is expected to grow at this same rate. The aftertax expected returns on the two stocks are equal (because they are in the same risk class).    What is the pretax required return on Gordon’s stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

A Preferred Stock Pays A Dividend Of $2.00 In Perpetuity. If The Return Required

A preferred stock pays a dividend of $2.00 in perpetuity. If the return required by shareholders is 7%, then the price per share for this preferred stock is ________. A)$25.74 B)$18.69 C)$30.57 D)$28.57 E)none of the above

You Own 1,100 Shares Of Stock In Avondale Corporation. You Will Receive A

You own 1,100 shares of stock in Avondale Corporation. You will receive a $1.70 per share dividend in one year. In two years, the company will pay a liquidating dividend of $75 per share. The required return on the company’s stock is 20 percent.    a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would your cash flow be for each year for the next two years? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations.)

After Completing Its Capital Spending For The Year, Carlson Manufacturing Has $1,700 Extra

After completing its capital spending for the year, Carlson Manufacturing has $1,700 extra cash. Carlson’s managers must choose between investing the cash in Treasury bonds that yield 3 percent or paying the cash out to investors who would invest in the bonds themselves.    a. If the corporate tax rate is 22 percent, what personal tax rate would make the investors equally willing to receive the dividend or to let Carlson invest the money? (Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.)     b. Is the answer to (a) reasonable? Yes No c. Suppose the only investment choice is a preferred stock that yields 6 percent. The corporate dividend exclusion of 50 percent applies. What personal tax rate will make the stockholders indifferent to the outcome of Carlson’s dividend decision? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)     d. Is this a compelling argument for a low dividend-payout ratio? Yes No

Excel Inc. Is Planning To Pay A Dividend Of $2.80 In The Next Year

Excel Inc. is planning to pay a dividend of $2.80 in the next year and expects to grow the dividend at a constant rate of 5% per year, indefinitely. If the required rate of return by shareholders is 11%, then the price of this stock should be ________. A)$49.00 B)$51.80 C)$56.00 D)$42.04 E)none of the above

Excel Inc. Is Planning To Pay A Dividend Of $2.80 Next Year And Expects

Excel Inc. is planning to pay a dividend of $2.80 next year and expects to grow the dividend at a constant rate of 5% per year, indefinitely. If the required rate of return by shareholders is 11%, then the price of this stock should be ________. A)$49.00 B)$51.80 C)$46.67 D)$42.04 E)none of the above

A Rapidly Growing Company Just Paid A Dividend Of $1.50 A Share. For The

A rapidly growing company just paid a dividend of $1.50 a share. For the next three years, the earnings growth rate is projected to be 15% each year, and then 4% each year thereafter. If the required rate of return is 9%, what is the value of the stock? A)$35.15 B)$38.63 C)$43.88 D)$41.65

KTP’s Most Recent Dividend Was $1.24 Per Share, And The Stock Is Selling Today

KTP’s most recent dividend was $1.24 per share, and the stock is selling today in the market for $63. The dividend is expected to grow at a rate of 5% per year for the foreseeable future. If the market return is 7% on investments with comparable risk, should you purchase the stock? A)No, because the stock is overpriced $2.10. B)Yes, because the stock is underpriced $2.10. C)Yes, because the stock is underpriced $1.00. D)No, because the stock is overpriced $1.00.

PLEASE SHOW WORK! Thanks! Free Cash Inc.’s Cost Of Capital Is Estimated To

PLEASE SHOW WORK! Thanks! Free Cash Inc.’s cost of capital is estimated to be 12%. The free cash flows to the firm is estimated to be $16,000, $19,250, and $23,000 in each of the next three years. Free cash flows beyond year 3 are estimated to grow at an annual rate of 9%. Applying the growing perpetuity formula, the terminal value of Free Cash Inc. as of year 3 is estimated to be $835,667. Free Cash Inc.’s current value of existing debt is $58,157. Estimate the value of the equity of Free Cash Inc. by applying the free cash flow to the firm method. The value of the equity of Free Cash Inc. by applying the free cash flow to the firm method is?

What Is The Expected Return On An Asset That Is Expected To Have Returns

What is the expected return on an asset that is expected to have returns of -10%, 8%, and 20% when the economy is in boom, normal, and recession states, respectively? The probabilities of boom, normal, and recession states happening are 20%, 50%, and 30%, respectively. A)6.00% B)2.67% C)8.00% D)5.00%

What Is The Total Risk Of The Returns On An Asset That Gives Returns

What is the total risk of the returns on an asset that gives returns of 20%, 5%, and -15% with the probabilities of 20%, 50%, and 30%, respectively? A)156.00% B)14.40% C)3.69% D)14.34% E)12.49%

You Have A Two-stock Portfolio. One Stock Has An Expected Return Of 12% And

You have a two-stock portfolio. One stock has an expected return of 12% and a standard deviation of 24%. The other has an expected return of 8% and a standard deviation of 20%. You invested in these stocks equally (50% of your investment went toward each of the two stocks). If the two stocks are negatively correlated, which one of the following is the most feasible standard deviation of the portfolio? A)23% B)22% C)21% D)not enough information to determine

You Have A Portfolio With Three Stocks. The Table Below Summarizes The Weights And

You have a portfolio with three stocks. The table below summarizes the weights and betas of those three stocks. Weight Beta I 50% 2.10 II 30% 1.25 III 20% 0.55 What is the beta of the portfolio? A)1.30 B)0.43 C)cannot be determined D)1.54 E)0.51

Please Show All Work And Formula: Please Use The Information On The Table Below

Please show all work and formula: Please use the information on the table below to answer this question. Security                       Actual Return             Beta A                                 12%                             1.2 B                                  10%                             1.0 C                                  14%                             1.4 Assume the risk-free interest rate is 1% and the market risk premium is 5.5%. An investor would like to invest $40,000 in Security A, $25,000 in security B and $50,000 in Security C. Find the portfolio’s expected return. Find the portfolio’s actual return. Based on your answers to a and b, is the portfolio’s return higher or lower than required? How should prices react?

1)True Or False: You Can Create A Riskless Two-stock Portfolio If You Have Two

1)True or false: You can create a riskless two-stock portfolio if you have two stocks that are perfectly positively correlated. 2)True or false: If an expected stock return is above the SML, then the stock is overvalued. 3)True or false: Generally speaking, the cost of equity is cheaper than the cost of debt. 4)True or false: The cost of preferred stock creates a tax shield (tax savings). 5)True or false: It is NOT appropriate to use the firm’s weighted average cost of capital when the firm is considering extending a current project. 6)True or false: Based on the PI decision rule, you accept a project if the PI is greater than 0. 7)True or false: When you have to rank multiple projects, the internal rate of return method is the way to go. 8)True or false: The sales price of old equipment that is replaced by new equipment is included in the capital budgeting calculation.

Currently, The U.S. Treasury Is Traded At 2.5%. The Market Offers A Premium Over

Currently, the U.S. Treasury is traded at 2.5%. The market offers a premium over the risk-free rate of 6%. If the beta of a stock is 0.93, what is the required rate of return of the stock? A)9.26% B)8.33% C)5.76% D)8.08%

You Are Trying To Decide Whether To Purchase Stock Or Not. The Stock Is

You are trying to decide whether to purchase stock or not. The stock is currently sold for $41.54 and is expected to be $45.33 in a year. A dividend of $2.00 per share will be distributed during the year. The stock has a beta of 1.3. The risk-free rate is 3%, and the market return is 12%. Based on the information, should you buy the stock? A)Yes, because the expected return of the stock is below the SML. B)No, because the expected return of the stock is below the SML. C)Yes, because the expected return of the stock is above the SML. D)No, because the expected return of the stock is above the SML.

Cox Healthcare Clinic Is Evaluating A Capital Budgeting Project That Costs $52,125 And

Cox Healthcare Clinic is evaluating a Capital Budgeting project that costs $52,125 and has expected net cash flows of $12,000 per year for eight years. The first inflows occur one year after the cost outflow and the project has a cost of capital of 12 percent. Below is a table of cash flows for the Capital Budget project: Year Annual Cash Flow Cumulative Cash Flow 0 -$52,125 -$52,125 1 $12,000 -$40,125 2 $12,000 -$28,125 3 $12,000 -$16,125 4 $12,000 -$4,125 5 $12,000 $7,875 6 $12,000 $19,875 7 $12,000 $31,875 8 $12,000 $43,875 QUESTIONS: Answer and Respond to the Following. Please show your work. What is the project’s payback? What is the project’s NPV? What is the IRR? Is the project financially acceptable? Explain your answer.

Shadow Corp. Has No Debt But Can Borrow At 6.4 Percent. The Firm’s WACC

Shadow Corp. has no debt but can borrow at 6.4 percent. The firm’s WACC is currently 9.7 percent and the tax rate is 22 percent. a. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the firm converts to 25 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the firm converts to 50 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-1. If the firm converts to 25 percent debt, what is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-2. If the firm converts to 50 percent debt, what is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What Is A Straddle, And Why Would An Investor Choose To Buy One? Assume

What is a straddle, and why would an investor choose to buy one? Assume an investor buys a $21 straddle on Macy’s. At what stock prices at expiration will that position be profitable? Assume at expiration Macy’s sells for $14: what will the % return be on the straddle? How much $ profit or loss will the investor earn per share? Macy’s currently trades at $22.68. Below are the options currently listed on Macy’s with January 2020 expirations. In answering the questions, if you need to buy an option assume you need to pay the relevant ask price, and if you need to sell an option assume you receive the relevant bid price. 6. Assume a different investor is bullish on Macy’s and is considering the following three potential investments. If at option expiration in January the stock price is $27.50, what will the return be (% and $ per share) for each choice: a. Just buying the stock at $22.68. b. Just buying the $23 call. c. Buying a bull spread using the $23 and $26 contracts

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