Penguin, Incorporated, has balance sheet equity of $5.8 million. At the same time, the income statement shows net income of $864,200. The company paid dividends of $466,668 and has 100,000 shares of stock outstanding. If the benchmark PE ratio is 22, what is the target stock price in one year? Assume the firm will grow at the sustainable growth rate. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Target stock price
Q: Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Cash Flow…
A: The payback period is the time to recover the cost of the investment.
Q: Year Cash Flow (A) Consider the following two mutually exclusive projects Cash Flow (8) e -$ 54,000…
A: Capital budgeting is a process of evaluating and selecting profit-generating projects, it involves…
Q: a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price…
A: Maintenance margin makes sure you have enough cash or value in your investment account to compensate…
Q: Grant, Incorporated, has the following mutually exclusive projects Year Project A Project B 0 -$…
A: The time value of money is a financial concept that is used to analyze various investments and…
Q: Stock 1 has an expected return of 4% and a standard deviation of 38 %. Stock 2 has an expected…
A: The variance of a portfolio is a measure of how the returns of the individual assets in the…
Q: Jay purchased a 90-day $500,000 bank bill (at a simple interest rate) on 15 July 2021. The purchase…
A: The correct answer is d. 16.970%.Explanation:The correct answer is d. 16.970%.Here's how to…
Q: Diversity groups identified in the market today can include extroverts, introverts, atheists, and…
A: Diversity groups identified in the market typically refer to characteristics such as race,…
Q: sh Gardens Co. bought a new truck for $58, 000. It paid $6, 380 of this amount as a down payment and…
A:
Q: Madetaylor Inc. manufactures financial calculators. The company is deciding whether to introduce a…
A: after-tax salvage value is calculated as follows:- after-tax salvage value =
Q: I compute the EAC for both machines.
A: The equivalent annual cost is comparable to calculating an item's annual cost, even if it is a…
Q: You need a particular piece of equipment for your production process. An equipment-leasing company…
A: Leasing alternative:There is no initial cost associated with the leasing alternative.The net present…
Q: Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each…
A: Capital budgeting is a tool to assess and select long-term investment possibilities. It entails…
Q: A debt of $10,000 is carrying interest at 7.7%/year compounded semi-annually and is due in 78 years.…
A:
Q: Suppose that we have this information about the current market return and the risk-free return: •…
A: Market return = 12%Risk-free rate = 8%Beta = 1.4Cost of equity can be calculated by using the…
Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…
A: A bond's interest payment made in relation to its face value, or par, is known as the coupon rate.…
Q: A call option is currently selling for $2.9. It has a strike price of $50 and six months to…
A: The put-call parity theorem is a principle that establishes a relationship between the prices of…
Q: What is the present value of a 10-year bond that has 4 years left-to-maturity (N), 7% annual…
A: The objective of the question is to calculate the present value of a bond that has 4 years left to…
Q: Beale Manufacturing Company has a beta of 1.2, and Foley Industries has a beta of 0.40. The required…
A: The objective of the question is to find out by how much Beale's required return exceeds Foley's…
Q: Exercise 15-4 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-2]…
A: A lease is defined as a contractual agreement incorporated between two business entities where one…
Q: 2. Ms. Bayer comes to your bank, Bank of America (BOA), to ask for advice on a planned house…
A: Since you have posted multiple questions, we will provide the solution only to the first question as…
Q: Elmo's Burger's has a bond outstanding with an annual coupon rate of 3.9% and a face value of…
A: annual coupon = par value x coupon rate
Q: Calculate, to the nearest cent, the future value FV of an investment of $ 10,000 at the stated…
A: Present Value (PV) of investment = $10,000Monthly interest rate (r) = 0.1% or 0.001Number of…
Q: What is the IRR and NPV of the below CFs if discount rate is 12%. (Calculate in excel equation.…
A: Calculating Internal Rate of Return and Net Present Value in Excel• IRR = IRR(A2:A9,0.12)• A2:A9…
Q: Why do u think it is impotant to allow funding for maintainance and extensions and not only the…
A: The objective of the question is to understand the importance of allocating funds for maintenance…
Q: Please show proper steps thanks
A: Sure! To find the coupon rate in a mathematical way, we need to solve for the coupon payment using…
Q: The preferred stock of Dallas platinum exchange has a par value of $52 and pays a 9% dividend per…
A: Par value of Dividend = $52Dividend rate = 9%Beta of stock = 1.94Risk-free rate = 2.6%Market return…
Q: After a 1 year investment you receive 7.5% interest (nominal) from your bank. However, looking at…
A: The International Fisher Effect (IFE) is an economic theory that suggests changes in exchange rates…
Q: K The yield to maturity of a $1,000 bond with a 7.5% coupon rate, semiannual coupons, and two years…
A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…
Q: Year Returns x Y 12345 8% 12% 2 21 27 3 - 27 - 32 4 11 18 18 24 Using the returns shown above,…
A: Standard deviation is measure of risk and is measured as deviation from mean return of the stock.
Q: Problem 1 Jim is planning to invest between $12,000 and $15,000 in two types of investment:…
A: Given:Amount to be invested is between $12000 to $15,000Yield of investment 1 is 6% and Yield of…
Q: Seven years ago Barbour Bakeries issued 20-year bonds to fund a portion of its capital investments.…
A: YTM stands for Yield to Maturity, a measure representing the total return anticipated on a bond if…
Q: Haperville bank has total assets of $100 million and equity capital of $3 million. Its income…
A: New balance of equity capital = Opening equity capital + Current year addition to equity capital
Q: A debt of $7931 23 is repaid by payments of $1129.24 in 7 months, $1229.85 in 15 months, and a final…
A: Debt amount = $7931.23Payment in 7 month = $1129.24Payment in 15 month = $1229.85Final payment made…
Q: What primary factor should a creditor consider when evaluating whether a corporation can pay the…
A: The primary factor a creditor should consider while evaluating whether a corporation can pay…
Q: Originally attributed to A Tribe Called Quest, American rapper Meek Mill has stated “Scared money…
A: Meek Mill's statement, "Scared money don't make no money," reflects the idea of the risk premium in…
Q: The following table summarizes prices of various default-free zero-coupon bonds (expressed as a…
A: Bonds are a type of debt instrument that helps organizations and governments borrow money in the…
Q: Stocks A and B have the following historical returns: Year Stock A's Returns, rA Stock B's…
A: The objective of the question is to calculate the average rate of return for Stocks A and B over the…
Q: You are preparing for your retirement and have decided to begin saving early. Based on your…
A: The idea of funding retirement expenses with a compound interest account is at the center of the…
Q: At a recent board meeting of Dartig Co, a non-executive director suggested that the company’s…
A: The agency problem arises when a principal (shareholder in a company) hires an agent…
Q: K You are considering how to invest part of your retirement savings. You have decided to put…
A: The objective of the question is to calculate the new value of the portfolio, the return the…
Q: Cooperton Mining just announced it will cut its dividend from $4.00 to $2.50 per share and use the…
A:
Q: Lohn Corporation is expected to pay the following dividends over the next four years: $16, $12, $11,…
A: A stock is a security that offers the ownership interest in the underlying company which entitles…
Q: You are considering two ways of financing a spring break vacation. You could put it on your credit…
A: Option 1Annual Percentage Rate (APR) = 18% or 0.18Monthly rate = APR / 12 = 0.18 / 12 =…
Q: Continuing Case 15. Personal Balance Sheet Jamie Lee Jackson, age 24, now a busy full-time college…
A: Balance sheet is a financial statement that shows the position of Assets, Liabilities and Net worth…
Q: settlement prices are $1.1126, $1.1133, and $1.1050. Calculate the balance of the performance bond…
A: A future contract is similar to an agreement to purchase or sell an item at a specific price at a…
Q: Which of the following statements are reasons employers may choose to delay eligibility of employees…
A: Retirement plan:A retirement plan is a financial arrangement designed to provide individuals with a…
Q: Washington Mutual was a US Bank which went bankrupt at the end of 2008 due to a number of risk…
A: The objective of this question is to understand how the application of stress testing risk…
Q: 2. The quoted price of a bond with a coupon rate of 4.5%, payable semi-annually, maturing on March…
A: The objective of the question is to calculate the total price that must be paid for a bond, given…
Q: Beacon Company is considering automating its production facility. The initial investment in…
A: "NPV can be utilized to evaluate a project's viability. A project with a positive NPV can be…
Q: You plan to start saving for your son's university education. He will begin university when he turns…
A: The time value of money is a concept in finance that takes into account the effect of compounding to…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Dont use excel please DIRECTIONS: Compute the requirements of each problem. All computations must be handwritten. A. HYZEL Corporation, a domestic corporation, is expected to distribute P1.50 cash dividends at the end of the year. It is forecasted that the dividends will grow at a constant rate of 7% a year. The required rate of return of the common stock of HYZEL is 12.6%, Required: Using the constant growth stock valuation model, compute the current value per share where D1 = P1.50 B. IZZY Company paid dividends to its common stockholders at P2.75 per share on December 31, 2018. The common stock of IZZY is selling in the market at P67.90 per share. The dividend growth rate of the company is 5.6% and the required rate of return of the common stock is 7.5%. Required: 1. Using the discounted dividend model, how do you compute the market price of the common stock? 2. Will an investor consider buying the common stock of IZZY at 963.90 per share?Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm's cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of equity % b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.) Cost of equity % c. Which of the two estimates is more reasonable?Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm’s cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
- Last year Artworks, Inc. paid a dividend of $1.75. You anticipate that the company’s growth rate is 6 percent and have a required rate of return of 9 percent for this type of equity investment. What is the maximum price you would be willing to pay for the stock? Could you answer in an equation form so i can see where the numbers are supposed to be plugged inSuppose instead that the company is about to pay a dividend of $2.00 per share. You also learn that the company is expected to have net income of $100 million, dividends of $50 million, and total equity of $1.5 billion (and that these relationships are expected to be stable). If the relevant required rate of return is 10%, what is the intrinsic value per share of the company’s stock?Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.5%, and the current dividend yield is 8.50%. Its beta is 1.33, the market risk premium is 14.50%, and the risk-free rate is 2.70%. a. Use the CAPM to estimate the firm's cost of equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. Now use the constant growth model to estimate the cost of equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent. c. Which of the two estimates is more reasonable? a. Cost of equity % % c. Which of the two estimates is more reasonable? b. Cost of equity
- GPS Inc. wishes to estimate its cost of retained earnings. The firm's beta is 1.21. The rate on 6-month T-bills is 0.036, and the return on the market portfolio index is 0.119. What is the appropriate cost for retained earnings in determining the firm's cost of capital? Instruction: Type your answer as a decimal, and round to three decimal places.Pharmecology just paid an annual dividend of $1.50 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 3.50% per year. The nominal cost of capital is 10.25%.a. What is Pharmecology’s current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would be Pharmecology’s current stock price using forecasted real dividends and a real discount rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.)The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 8% per year. Callahan's common stock currently sells for $21.75 per share; its last dividend was $1.50; and it will pay a $1.62 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the firm's beta is 1.6, the risk-free rate is 8%, and the average return on the market is 12%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % c. If the firm's bonds earn a return of 10%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the judgmental risk premium of 4% in your calculations. Round your answer to two decimal places. % d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Do not…
- I am having issues with this problem and would like some help if possible: The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $21.00 per share; its last dividend was $2.40; and it will pay a $2.52 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 1.4, the risk-free rate is 5%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 13%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % If you have equal confidence in the…A firm uses a target payout ratio of 0.49. In recent years, its earnings per share (EPS) has been $4.22 and using that EPS, it has just paid its annual dividend of $2.07 per share. One year from now, the firm expects its EPS to increase to $4.97 but does not believe that the entire increase in its earnings is permanent. It intends to select its dividend amount according to the Lintner model, using a speed of adjustment coefficient of 0.62. Question content area bottom Part 1 Part A: What dividend will the firm issue in one year?Dividend in one year: $enter your response here per share. (Enter your answer rounded to two decimal places and use the rounded value in Part B).Part B: If the EPS remains at its higher value for an additional year, what dividend will the firm issue in two years?Dividend in two years: $enter your response here per share. (Enter your answer rounded to two decimal places).The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 4% per year. Callahan's common stock currently sells for $26.75 per share; its last dividend was $2.50; and it will pay a $2.60 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the firm's beta is 2.0, the risk-free rate is 8%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % c. If the firm's bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost…