QUESTION Last year, when the stock of Shipping Enterprises was sellingfor $48 a share the dividend yield was 4.5 percent. Today, thestock is selling for $46 a share. What is the current requiredreturn on this stock if the company maintains a constant dividendgrowth rate of 3 percent? Last years selling price = $48 Dividend yield […]
QUESTION Problem: 7-3Bond ValuationNungesser Corporations outstanding bonds have a $1,000 parvalue, a 9% semiannual coupon, 8 years to maturity, and an 8.5%YTM. What is the bonds price?Problem 7-18Bond Returns: This answer is in the back of the bookbut I dont just want that, I need to know how to get the a Par Value of […]
QUESTION Explain how capital budgeting decisions are derived Capital budgetin or investmentappraisal is the palnning process used to determine wheter afrims long term investments such as newmachinery, replacement machinery, new palnts andreasearch development prijects are worthpursuing. Popular methods of capitalbudgeting include for decision makings are:- 1) Net Present Value (NPV) 2) Internal rate of return […]
QUESTION Auto Loans R Them loans you $24,000 for four years to buy acar. The loan must be repaid in 48 equal monthly payments. Theannual interest rate on the loan is 9 percent. What is the monthlypayment?a. $500.92b. $543.79c. $563.82d. $597.24 Present Value of LoanAmount (PV) $24,000 Annual Interest Rate onLoan (RATE) 9% Number of […]
QUESTION A bank loan agreement calls for an interest rate equal to prime rate plus 1%. If prime rate averages 9% and non-interest-earning compensating balances equal to 10% of the loan must be maintained, what are the APR and the APY of the loan assuming annual payments? Annual Percentage Rate(APR): In the context of credit […]
QUESTION Kaufman Enterprises has bonds outstanding with a $1,000 facevalue and 10 years left until maturity. They have an 11percent annual coupon payment and their current price is$1,175. The bonds may be called in 5 years at 109 percent offace value (Call price = $1090)What is the yield to matur Par Value of theBond $1,000 […]
QUESTION Bradford Manufacturing company has a beta of 1.45, whileFarley Industries has a beta of 0.85. The required return onan index fund that holds the entire stock market is 12.0percent. The risk-free rate of interest is 5 percent. By how much does Brandordss required return exceed Farle Bradfords ManufacturingCompanys Beta 1.45 Farley Industries Beta 0.85 […]
QUESTION International Cruise Lines sold an issue of 15-year $1,000 parbonds to build new ships. The bonds pay 6.85% interest,semi-annually. Todays required rate of return is 8.35%. How muchshould these bonds sell for today? Round off to the nearest$1.a. $1,065b. $873c. $936d. $918 Par Value of theBond $1,000 Semi annual Coupon Payment [$1,000 *(6.85%/2)] $34.25 […]
QUESTION Which of the following statements about project standing alonerisk is true?a. It ignores the fact that much of the risk of a project willbe diversified away as the project is combined with the firmsother projects.b. It ignores the cash flows that are associated with aproject that occur beyond the p a. It ignores the […]
QUESTION Smith Technologies is exptected to generate $150 million in freecash flow next year, and FCF is expected to grow at a constant rateof 5 percent per year indefinitely. Smith has no debt orperferred stock, and its WACC is 10 percent. If Smith has 50million shares of stock outstanding, what FreeCashflow for next year (FCF) […]
