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rate of interest

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Question


You are attempting to value a call option with an exercise price of $75 and one year to expiration.

The underlying stock pays no dividends, its current price is $75, and you believe it has a 50% chance of increasing to $95 and a 50% chance of decreasing to $55. The risk-free rate of interest is 10%. Based upon your assumptions, calculate your estimate of the the call option’s value using the two-state stock price model. (Do not round intermediate calculations. Round your answer to 2 decimal places.)  

Value of the call           $   

 
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cash flow data

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Question

The following table shows cash flow data for Rocket Transport.     Cash

dividend$80,000 Purchase of bus$33,000 Interest paid on debt$25,000 Sales of old equipment$72,000 Repurchase of stock$55,000 Cash payments to suppliers$95,000 Cash collections from customers$300,000 

a. Find the net cash provided by or used in investing activities.

Cash from investments $ 

b. Find the net cash provided by or used in financing activities. (Negative amount should be indicated by a minus sign.)

Cash from financing $ 

c. Find the net increase or decrease in cash for the year.

Total cash flow $ 

 
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interest, depreciation and taxes

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Question

The MoMi Corporation’s income before interest, depreciation and taxes, was $3.3 million in the year just ended,

and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pretax cash flow each year. The tax rate is 30%. Depreciation was $390,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 14% per year, and the firm currently has debt of $6 million outstanding. Use the free cash flow approach to calculate the value of the firm and the firm’s equity. (Enter your answer in dollars not in millions.)  

  Value of the firm $

Value of the firm’s equity $

 
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rate of return

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Question

The risk-free rate of return is 6%, the required rate of return on the market is 14%, and High-Flyer stock has a

beta coefficient of 1.2. If the dividend per share expected during the coming year, D1, is $5.40 and g = 6%, at what price should a share sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.)  

Share price           $

 
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