QUESTION Assume that B (in Problem ) is $3 million and S is $7 million. The bonds have a 14 percent yield to maturity, and the stock is expected to pay $500,000 in dividends this year. The growth rate of dividends has been 11 percent and is expected to continue at the same rate. Find […]
Date: September 2nd, 2020
QUESTION Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of these alternatives.ExpectedStandard deviationAlternativereturnof returnA20%7.0%B229.5C196.0D165.5a. Calculate the coefficient of variation for each alternative.b. If the firm wishes to minimize risk, which alternative do you recommend? Why? Concept: Coefficient […]
Date: September 2nd, 2020
QUESTION Zydeco Enterprises is considering undertaking a special project requiring an initial outlay of $90,000. The project would have a two-year life, after which there will be no expected salvage or terminal value. The possible incremental after-tax cash flows and associated probabilities of occurrence are as follows: Net Cash flows for 1st year= $60,000*0.3= $18,000 […]
Date: September 2nd, 2020
QUESTION IntegrativeRisk and valuation Giant Enterprises stock has a required return of 14.8%. The company, which plans to pay a dividend of $2.60 per share in the coming year, anticipates that its future dividends will increase at an annual rateconsistent with that experienced over the 20062012 period, when the following dividends were paid:YearDividend per share2012$2.4520112.2820102.1020091.9520081.8220071.8020061.73a. […]
Date: September 2nd, 2020
QUESTION Figurate Industries has 750,000 shares of cumulative preferred stock outstanding. It has passed the last three quarterly dividends of $2.50 per share and now (at the end of the current quarter) wishes to distribute a total of $12 million to its shareholders. If Figurate has 3 million shares of common stock outstanding, how large […]
Date: September 2nd, 2020
QUESTION Bond valuation Lahey Industries has outstanding a $1,000 par-value bond with an 8% coupon interest rate. The bond has 12 years remaining to its maturity date.a. If interest is paid annually, find the value of the bond when the required return is (1) 7%, (2) 8%, and (3) 10%.b. Indicate for each case in […]
Date: September 2nd, 2020
QUESTION Relationship between future value and present valueMixed stream Using the information in the accompanying table, answer the questions that follow.Year (t)Cash flow1$ 800290031,00041,50052,000a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.b. How much would you be willing to pay for an opportunity to buy this stream, […]
Date: September 2nd, 2020
QUESTION Time value Jim Nance has been offered an investment that will pay him $500 three years from today.a. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity today?b. What is the most he should pay to purchase this payment today?c. If Jim can purchase this investment for […]
Date: September 2nd, 2020
QUESTION ETHICS PROBLEM The SEC is trying to get companies to notify the investment community more quickly when a material change will affect their forthcoming financial results. In what sense might a financial manager be seen as more ethical if he or she follows this directive and issues a press release indicating that sales will […]
Date: September 2nd, 2020
QUESTION Pro forma income statement Euro Designs, Inc., expects sales during 2013 to rise from the 2012 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2013 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2013 to $320,000. […]
Date: September 2nd, 2020
