In the real world we find that dividends a) are uaually more stable than earnings b) fluctuate more widely than earnings c) tend to be a lower percentage of earnings for mature firms d) Are usually changed every year to reflect earnongs changes, and these changes are randomly higher or lower,...
During the past five years, you owned two stocks that had the following annual rates of return: Year Stock T Stock B 1 17.0% 7.0% 2 6.0% 2.0% 3 -10.0% -8.0% 4 -1.5% 1.5% 5 14.0% 5.0% a. Compute the arithmetic mean...
Mr. Franklin is 35 years of age, is in excellent health, and pursues an active life style. He is married and his spouse is the same age and is in good health. Both Mr. and Mrs. Franklin are school teachers who earn about $60,000 per year. Both of them plan to retire at age 62. Each of them...
On January 2, 2010, McGowan Corporation issued 20-year bonds payable with a face value of $300,000 and a face interest rate of 8 percent. The bonds were issued to yield a market interest rate of 9 percent. Interest is payable annually on January 2. In calculating the present value of the bond...
The stock of the Madison Travel Co. is selling for $56 per share. You put a limit buy order at $48 for one month. During the month, the stock price declines to $46, then jumps to $66, which is the month-end price. a. Ignoring commissions, what would have been your rate of return on this...
Expansion Decisions Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $410,000 net cash flow per unit for the next five years. The engineering department has...
P4-2 Future value calculation Without referring to tables or to the preprogrammed function on your financial calculator, use the basic formula for future value along with the given interest rate, i, and the number of periods, n, to calculate the future value interest factor in each of the cases...
DuPont Analysis: You have located the following information on Rock Company: debt ratio = 40%, capital intensity ratio = 2.25 times, profit margin = 8%, and dividend payout ratio = 25%. What is the return on equity for Rock?
Mahjong, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $43,000 $43,000 1 23,000 7,000 2 17,900 13,800 3 12,400 24,000 4 9,400 26,000 Required:...
consider two streams of cash flows, A and B. Stream A's first cash flow is $8,900 and is received three years from today. Future cash flows in stream A grow by 4 percent in perpetuity. Stream B's first cash flow is -$10,000, is received two years from today, and will continue in...
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1. Can you help me with this valuation problem?: Imagine that you are trying to evaluate the economics of purchasing an automobile. You expect the car to provide annual after-tax cash benefits of $1,200 at the end of each year and assume that you can sell the car for after-tax proceeds of $5,000 at the end of the planned 5-year ownership period. All funds for purchasing the car will be drawn from your savings, which are currently earning 6% after taxes.
- a.Identify the cash flows, their timing, and the required return applicable to valuing the car.
- b.What is the maximum price you would be willing to pay to acquire the car? Explain.
2. How do you calculate the before tax-cost of the Sony bond and the after-tax cost of the Sony bond given the following information?:
- David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security:
- Sony bond
- Par value $1,000 Coupon interest rate 6% Tax bracket 20%
- Cost $930 Years to maturity 10