Get college assignment help at uniessay writers Please show your work: You require an IRR of 13% to accept a project. If the project will yield $10,000 per year for 6 years, what is the maximum amount that you would be willing to invest in the project?
b. What is the value of a $1,000 par value bond with annual payments of an 12% coupon with a maturity of 10 years and a 7% required return? c. What is the value of a $1,000 par value bond with annual payments of an 8% semiannual coupon with a maturity of 10 years and a 11% required return? d. What is the value of a $1,000 par value bond with annual payments of an 8% semiannual coupon with a maturity of 20 years and a 6% required return? I will also be needing the formula used to solve these quesitons and a step by step process. Thanks.
Owners of common stock are not guaranteed any dividend payments and have the lowest-priority claim on the firm’s assets in the event of bankruptcy. True False
Shirley invested in a U.S. government bond and earned a semiannual yield of 3.8 percent. The bond pays coupons twice a year. What is the effective annual yield (EAY) on this investment? 7.74% 7.6% 3.8% None of the above.
Normal yield curves are observed when the economy is growing. the economy is stagnant the economy is in recession. None of the above.
Gay Manufacturing is expected to pay a divident of $1.25 per share at the end of the year (D1=$1.25). the stock sells for $21.50 per share and its required rate of return is 10.5%. The divident is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? Correct Answer: 4.69%
Robello’s preferred stock pays a divident of $1.00 per quarter, and it sells for $77.50 per share. What is its effective annual (not nominal) rate of return? Correct answer: 5.26%
Kale Inc forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11.0% abd FCF is expected to grow at a rate of 5.0% after Year 2, what is the Year 0 value of operations, in millions? Year 1 2 _______________________________________ Free Cash Flow -$50 $135 Correct answer: $1,982
“Kale Inc forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11.0% abd FCF is expected to grow at a rate of 5.0% after Year 2, what is the Year 0 value of operations, in millions? Year 1 2 _______________________________________ Free Cash Flow -$50 $135 Correct answer: $1,982”
Task Type: Group Project Deliverable Length: 8-10 slides (individual) 500-1000 words (group) Points Possible: 250 Due Date: 10/29/2010 11:59:59 PM CT Fullhealth must prepare its annual operating budget for all lines of business. Group portion: Divide the budget sections among members and agree upon any necessary basics for a coordinated effort. Study all submissions and collaborate to write an executive summary. Submit one executive summary per group. Please add your file. Individual Deliverable: Prepare the annual operating budget summary including all lines of business. Prepare a budget for each line of business. The lines of business include health plan, three long-term care assisted living facilities, and two home healthcare agencies. Make sure the budgets for each line of business are properly proportionate to the overall budget.
Get college assignment help at uniessay writers Buena Terra Corporation is reviewing its capital budget for the upcoming year. It has paid a $3.00 dividend per share (DPS) for the past several years, and its shareholders expect the dividend to remain constant for the next several years. The company’s target capital structure is 60% equity and 40% debt; it has 1,000,000 share of common equity outstanding; and its net income is $8 million. The company forecasts that it would require $10 million to fund all of its profitable (that is, positive NPV) projects for the upcoming year. a) If Buena Terra follows the residual dividend model, how much retained earnings will it need to fund its capital budget? b) If Buena Terra follows the residual dividend model, what will be the company’s dividend per share and payout ratio for the upcoming year? c) If Buena Terra maintains its current $3.00 DPS for next year, how much retained earnings will be available for the firm’s capital budget? d) Can the company maintain its current capital structure, maintain the $3.00 DPS, and maintain a $10 million capital budget without having to raise new common stock? e) Suppose that Buena Terra’s management is firmly opposed to cutting the dividend; that is, it wishes to maintain the $3.00 dividend for the next year. Also, assume that the company was committed to funding all profitable projects and was willing to issue more debt (along with the available retained earnings) to help finance the company’s capital budget. Assume that the resulting change in capital structure has a minimal effect on the company’s composite cost of capital, so that the capital budget remains at $10 million. What portion of this year’s capital budget would have to be financed with debt? f) Suppose once again that Buena Terra’s management wants to maintain the $3.00 DPS. In addition, the company wants to maintain its target capital structure (60 percent equity and 40 percent debt) and maintain its 10 million capital budget. What is the minimum dollar amount of new common stock that the company would have to issue in order to meet each of its objectives? g) Now consider the case where Buena Terra’s management wants to maintain the $3.00 DPS and its target capital structure, but it wants to avoid issuing new common stock. The company is willing to cut its capital budget in order to meet its other objectives. Assuming that the company’s projects are divisible, what will be the company’s capital budget for the next year? h) What actions can a firm that follows the residual dividend policy take when its forecasted retained earnings are less than the retained earnings required to fund its capital budget?
“GS Cookie Co. forecasts cash receipts for January and February of $9,000 and $10,000, respectively. Cash Payments of $4,000 and $5,000 are expected in these two months. GS Cookie’s cash balance at the beginning of January was $5,000, a level that it attempts to maintain. At the beginning of the year, GS Cookie has a $13,000 balance outstanding on its line of credit at the local bank. Based on its cash budget, how much of the line of credit can GS Cookie repay in January and February? ”
X Co. is a relativel small, privately owned firm. Last year the company had after-tax income of $15,000, and 10,000 shares were outstanding. The owners were trying to determine the equilibrium market value for the stock, prior to taking the company public. A similar firm which is publicly traded had a price/earnings ratio of 5.0. using only the information given, estimate the market value of one share of X Co. stock.
Kahn Inc has a target capital structure of 60 percent common equity and 40 percent debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc has a WACC of 13 percent, a before-tax cost of debt of 10 percent, and a tax rate of 40 percent. The company’s retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year is $3 and the current stock price is $35.
1. Fifteen years ago, Roop Industries sold $400 million of convertible bonds. The bonds had a 40-year maturity, a 5.75% coupon rate, and paid interest annually. They were sold at their $1,000 par value. The conversion price was set at $62.75; the common stock price was $55 per share. The bonds were subordinated debentures, and they were given an A rating; straight nonconvertible debentures of the same quality yielded about 8.75% at the time Roop’s bonds were issued. a. Calculate the premium on the bonds, that is, the percentage excess of the conversion price over the stock price at the time of issue. b. What is Roop’s annual before-tax interest savings on the convertible issue versus a straight-debt issue? c. At the time the bonds were issued, what was the value per bond of the conversion feature? d. Suppose the price of Roop’s common stock fell from $55 on the day the bonds were issued to $32.75 now, 15 years after the issue date (also assume that the stock price never exceeded $62.75). Assume interest rates remained constant. What is the current price of the straight bonds portion of the convertible bond? What is the current value if a bondholder converts a bond? Do you think it is likely that the bonds will be converted? e. The bonds originally sold for $1,000. If interest rates on A-rated bonds had remained constant at 8.75% and the stock price had fallen to $32.75, what do you think would have happened to the price of the convertible bonds? (Assume no change in the standard deviation of stock returns). f. Now suppose the price of Roop’s common stock had fallen from $55 on the day the bonds were issued to $32.75 at present, 15 years after the issue. Suppose also that the rate of interest had fallen from 8.75% to 5.75%. Under these conditions, what is the current price of the straight bond portion of the convertible bond? What is the current value if a bondholder converts a bond? What do you think would have happened to the price of the bonds? Note: answer only a, b,
Pigeon Express currently plows back 40 percent of its earnings and earns a return of 20 percent on this investment. The dividend yield on the stock is 4 percent. a. Assuming that Pigeon can continue to plow back this proportion of earnings and earn a 20 percent return on the investment, how rapidly will earnings and dividends grow? What is the expected return on Pigeon stock? b. Suppose that management suddenly announces that future investment opportunities have dried up. Now Pigeon intends to pay out all its earnings. How will the stock price change? c. Suppose that management simply announces that the expected return on new investment will in the future be the same as the market capitalization rate. Now what is Pigeon stock price?
19,000 motor homes @ $65,000 each and 6,000 luxury motor coaches @ $105,000 each wants to add portable campers and expects to sell 19,000 of these campers @ $21,000 each If they introduce the new campers they determined the existing motor homes sales to go up by 2500 and the motor coaches to reduce by 900 What is the amount to use as the annual sales figure when evaluating this project? why?
Currently sells 19,000 motor homes per year @ $65,000 each and 6,000 luxury motor coaches per year @ $105,000 each. The company wants to introduce a new portable camper to fill out its product line,and it hopes to sell19,000 of these campers per year @ $21,000 each. An independent consultant has determined that if the company introduces the new campers, it should boost the salesof its existing motor homes by 2500 units per year, and reduce the sales of its motor coaches by 900 units per year. What is the amount to use as the annual sales figure when evaluating this project? why?
1) Consider a pharmaceutical firm that is developing a new drug that it expects will have a significant effect. The firm has anticipated that the cash flows from this drug will begin at t=11 after FDA approval and continue for 15 years. Assume further that the cash flows beginning at t=11 will equal $1,800,000 per year and will remain constant for fifteen years. Assuming that the firm wishes to earn a minimum of 16%, what would be the present value as of today, t=0, of these cash flows?
kahn inc. has a target capital structure of 60 percent common equity and 40 percent debt to fund its $10 billio in operating assets. Futhermore, kahn inc has a wacc of 13 percent, a before-tax cost of debt of 10 percent, and a tax rate of 40 percent. the companys retained earnigs are adequate to provide the common equity portion of its capital budget. its expected dividend next year is $3 and current stock price is $35.
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