Suppose Bobby Axelrod, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.1. New Company expected return E(R new) New Company beta (b new) 15% 1.1 Should Bobby Axelrod invest in the new company? New Company R = risk free rate (Rf) + New Company beta x Market Risk Premium (MRP)
Q: None
A: Step 1:Final answer short: System A: NPV = $562,795.80System B: NPV = $1,279,931.39
Q: None
A: After altering its capital structure to include debt, the firm's required rate of return on equity…
Q: Rajesh would like to buy his first car and the one he has his eye on is $25,000, plus an extra 13%…
A: The periodic payments will be the installment payments paid by the borrower on the mortgage amount…
Q: Suppose you have a project that will cost $800,000 last for ten years. The cash flows for each year…
A: Given DataLower BoundUpper BoundProject Investment$800,000.00Cash Inflow$175,000.00Standard…
Q: a. Assuming that the expectations hypothesis is valid, compute the expected price of the four-year…
A: Answer image: Formulas Used:(b) beginning yearPrice of BondYield RateExpected ReturnForward…
Q: Joann wants to save for her daughter's education. Tuition costs $9,000 per year in today's dollars.…
A: The time value of money is a financial concept that acknowledges the idea that a dollar today is…
Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…
A: Step 1: Final answer: The coupon rate for the Williams Company bond is approximately 54.90%.
Q: Your Question : Please introduction and correct and incorrect option explain!
A: When it comes to options pricing, there are several key factors to consider. One of the most popular…
Q: What information does the payback period provide? Suppose you are evaluating a project with the…
A: Payback period2.50 yearsYearCash flows1$350,000.002$400,000.003$475,000.004$425,000.00WACC = 9%
Q: Based on the table below, the full price that Bond G will settle at on 16 June 2016 is closest to:…
A: PVFlat = PVFull - Accrued Interest PVFlat refers to the present value of a bond without accounting…
Q: Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par…
A: Given Data: Face value of the bond30years to maturity8Annual coupon rate8.3%
Q: Your Question : Please introduction and correct and incorrect option explain!
A: In conclusion, this project seems financially feasible given that the PI is higher than the…
Q: 8. (Portfolio of two stocks) The following spreadsheet presents data for stocks A and B. A B C 1 2…
A: Step 1:The return of portfolio is the weighted average return of Stock A and Stock B. Standard…
Q: Rare Agri-Products Ltd. is considering a new project with a projected life of seven (7) years. The…
A: 1. Appropriate rate for discounting the cash flows of the project (WACC): The Weighted Average Cost…
Q: Vijay
A: Step 1:We have to calculate the EPS before and EPS after reducing debt and then calculate the…
Q: Two competitors with very similar offerings currently have 20% and 15% market share respectively.…
A: The competitor with 15% market share plans to drop its price to $8 in an attempt to capture 18% of…
Q: please answer these two fast correctly 29.Which of the following is a false statement regarding…
A: To calculate Semitool's actual excess return, use the following formula: Actual Excess…
Q: Your firm has an average receipt size of $120. A bank has approached you concerning a lockbox…
A: Variables in the question: Description DataAverage receipt size ($)120Days…
Q: What is the return on a bond that was issued at 9% coupon rate, 10% YTM, for five years, Face value…
A: Step 1:
Q: The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is…
A: Assumptions:- Market capitalization rate = 20%- ROE for the next five years = 17%- ROE after year 5…
Q: Two annuities - certain of 1 p.a. are each payable half-yearly for n years. The first payment under…
A: In Time Value of Money (TVM), annuities are a sequence of equal payments that are given or received…
Q: Kara, Incorporated, imposes a payback cutoff of three years for its international investment…
A: Payback period:Payback period often favored for its simplicity, providing a quick assessment of an…
Q: If the modified duration is 6.8 and YTM dropped by 75 bp, and bond is selling at its face value of…
A: The objective of the question is to calculate the new price of the bond given the modified duration,…
Q: You own a 20-year, $12,000 bond issued by the National Widget Company of America, and you'd like to…
A:
Q: BP and Rosneft 2015. BP (UK) and Rosneft (Russia) had severed a long-term joint venture in 2013,…
A: Your calculations for parts a and b are correct! Here's a breakdown:a. Dividend in USD (July…
Q: Rare Agri-Products Ltd. is considering a new project with a projected.life of seven (7) years. The…
A: Let's start with the first step:1. Compute the appropriate rate for discounting the cash flows of…
Q: 1) A firm that is currently unlevered has WACC = rS = 10%/year. This company plans to do a…
A: The first part of the question is asking for the cost of equity (rS) after the firm has undergone…
Q: (1 point) A company is considering two insurance plans with the following types of coverage and…
A: Step 1: Assign variables Let x be the number of units of Plan ALet y be the number of units of Plan…
Q: None
A: The Net Present Value (NPV) of the incremental cash flow stream represents the difference in present…
Q: Vijay
A: Step 1:To calculate the yield value of a 32nd for the given Treasury bond, we need to understand…
Q: The Brownian Motion is used to model the liquid assets (i.e. "cash") of our startup company Math…
A: The probability that our assets will be worth a certain amount refers to the likelihood of achieving…
Q: The following graph is most likely CURVE CHART Display Range: 1M - 30Y Yield USBMK=4.525 5.6 5.4 5.2…
A: The image you sent is a graph of the US Treasuries spot curve. The spot curve shows the relationship…
Q: Didn't get answer
A: Answer image:
Q: Ayden’s Toys, Incorporated, purchased a $485,000 machine to produce toy cars. The machine will be…
A: The financial break-even point for the project is the level of sales at which the project generates…
Q: If the required return on the stock is 8 percent, what is the current share price?
A: Step 1: The calculation of the share price ABCDE1YearDividendTerminal valuePVF @ 8%Present value21 $…
Q: Colson Company has a line of credit with Federal Bank. Colson can borrow up to $370,500 at any time…
A: Line of credit or LOC is a flexible arrangement between a bank and a customer, wherein a customer…
Q: You are considering a project that costs $30 and has expected cash flows of $11.00, $12.10, and…
A:
Q: Consider four different stocks, all of which have a required return of 18.5 percent and a most…
A: Step 1:Stock W:Dividend in Year 1 = Current Dividend * (1 + Growth Rate)Dividend in Year 1 = $3.65 *…
Q: Peter will receive a study excellence award of $41,936 per year at the end of the next 10 years.…
A: The above answer can be explained as under - The future value of annuity = Periodic payment x [(1…
Q: Write the formula for the cost of capital. Explain how you would estimate each component of the cost…
A: The objective of the question is to calculate the cost of capital for XYZ Company. The cost of…
Q: Baghiben
A: Answer:
Q: None
A: NPV = present value of future cash flows - initial cash outflow(initial invest ment)depreciaiton = 5…
Q: Buyer Company bought 100 options of Target Co one year ago and would like to exercise them today.…
A: In an option contract, the dollar profit and loss can be determined by deducting the purchase price…
Q: Need help with both
A: Q1. Step 1: A bond pays coupons over the tenure of the bond and pays par value at the maturity of…
Q: Let's assume you finance your house through Wells-Fargo Bank. Below, please find the…
A: 1. Monthly Interest Rate: The annual interest rate is given as 5.0%. The monthly interest rate is…
Q: You are considering the purchase of one of two machines used in your manufacturing plant. Machine A…
A: MACHINE BCalculate the present value of the maintenance costs for the three…
Q: None
A:
Q: Last year, Hassan's Madhatter, Incorporated had an ROA of 6.8 percent, a profit margin of 12.24…
A: The objective of the question is to calculate the total assets of Hassan's Madhatter, Incorporated…
Q: A convertible security (usually convertible bonds or convertible preferred stock) may be tendered at…
A: 1. **Conversion Ratio**: This is calculated as the par value of the bond divided by the conversion…
Q: Due to a lack of information, a trader is not able to retrieve the yield of government bonds as the…
A: The call option price or the value of call option is affected by various factors such as strike…
Step by step
Solved in 2 steps
- Please use Excel to solve: You have just purchased a share of stock for $20. The company is expected to pay a dividend of $0.50 per share in exactly one year. If you want to earn a 10% return on your investment, what price do you need if you expect to sell the share immediately after it pays the dividend?Assume you are a financial planner seeking to earn some dividend income for a client, and thus need to understand the value of a $50,000 investment in a stock, ABC, which will pay an annual dividend in the amount of $.06 per dollar invested. Meaning, a $50,000 investment in this company will equate to $3,000 per year in dividend income. Assuming that all dividend income can be reinvested and earn 4% annually in interest, and your client would like to cash out the dividend income in 4 years, what is the future value of this stream of dividend payments? O $12,000.00 $12.459.64 O $13,248.97 O $16.248.97Q.You are CEO of a high-growth technology firm. You plan to raise $180m to fund anexpansion by issuing either new shares or new debt. With the expansion, you expectearnings next year of $24m. The firm currently has 10m shares outstanding, with a priceof $90 per share. Assume perfect capital markets.a. If you raise the $180m by selling new shares, what will the forecast for next year’searnings per share be?b. If you raise the $180m by issuing new debt with an interest rate of 5%, what willthe forecast for next year’s earnings per share be?c. What is the firm’s forward P/E ratio (i.e., the share price divided by forecastedearnings) if it issues equity? What is the firm’s forward P/E ratio if it issues debt?How can you explain the difference?
- As a financial analyst working for CSFB your job is to evaluate the equity value of the WIFI Inc. Your research identified the following information about that firm: it would pay an annual dividend of $1.20 per share next year (in 2022) and the required rate of return on capital is 20%. (a) Suppose that dividends are expected to stay constant forever. What is the maximum amount you would pay today (in 2021) for WIFI Inc? For parts b, c and d assume that dividends grow at a constant 3% rate a year forever. (b) What is the maximum amount you would pay today (in 2021) for WIFI Inc’s share of stock? (c) What is the capital gains yield for WIFI Inc.? (d) What is the dividend yield for WIFI Inc.? For part (e) assume that the dividends will be as follows $1.20 in 2022, $1.40 in 2023 and $1.60 in 2024. After that, dividends are projected to increase at a constant rate of 2% per year forever. (e) How much are you willing to pay today (in 2021) to buy one share of this stock?You are looking to purchase Company A. Your projections for the EBITDA of Company A are as follows: EBITDA $21.51 Year 1 $2.0 O $19.77 $21.78 Your cost of capital is 20%. Your investment banker shows you the EBITDA multiples for the following comparable companies: Company x 5.0x Company y 5.50x Company z 6.0x Year 2 $3.0 Given the above information what is the price that you would like to offer to Company A shareholders? Not enough information Year 3 $3.5 None of the above Year 4 $4.0 Year 5 $5.0Read the scenario below and answer the questions that follow. A company is under pressure from influential shareholders to change its dividend policy. The company has always followed the residual dividend policy, but the influential shareholders feel that the company needs to change to a stable pay-out ratio policy. The company just reported earnings of R232m for the year ended 31 March 2024. The company is considering the following investment opportunities for the upcoming financial year: Investment opportunity A BUD C E Cost R72m R62m R110m R96m R48m Internal rate of return 14.28% 13.03% 15.67% 16.01% 13.79% The company's cost of capital is 13.5% and its target capital structure is represented by a debt-to-assets ratio of 40%. The company has 28m ordinary shares outstanding.
- As the general manager of a firm, you are presented with an investment proposal from one of your divisions. Its net present value, if discounted at the cost of capital for your firm (which is 15 percent), is $ 1 00,000, and its internal rate of return is 20 percent. (a) What are the economic interpretations of the net present value and internal rate of return figures? In other words, what do they mean? (b) What, if any, additional information would you like to have before approving the project?An investor is considering starting a new business. The company would require $475,000 of assets, and itwould be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 13.5% return on the invested capital, which means that the firm must have an ROE of 13.5%. How much net income must be expected to warrant starting the business? Please show work in excelAdditional Activities Perform what is being asked in the following: 1. What will you pay today for a stock that is expected to make a P 45.00 dividend in one year if the expected dividend rate is 5% and you require a 12% return on your investment? 2. XYZ Company's preferred stock is selling for P 60.00 a share. If the required return is 8%, what will the dividend be two years from now? 3. Your broker is trying to sell you a stock with a current market price of P 2,160.00 The stock's last dividend was P 53.25, and earnings and dividends are expected to increase at a constant growth rate of 10%. Is the stock fairly valued if the return is 13%? Explain why or why not.
- You are a venture capitalist and have been approached by Cirrus Electronics, aprivate firm. The firm has no debt outstanding and does not have earnings now but isexpected to be earning $15 million in four years, when you also expect it to go public.The average price-earnings ratio of other firms in this business is 50.a. Estimate the exit value of Cirrus Electronics.b. If your target rate of return is 35 percent, estimate the discounted terminal valueof Cirrus Electronics.c. If you are contributing $75 million of venture capital to Cirrus Electronics, at aminimum what percentage of the firm value would you demand in return?3. Scenario analysis (i) You are leading a role of Chief Financial Officer of a Cement Company in Oman. Your company has huge current profit of RO 10 million and presently having a plan to capital investment of RO 8 in the next financial year. The company is willing to continue capital structure of debt 25% and Equity 75% in the future. How much of the RO 10 million should your company pay out as dividends? And what would be the dividend payout ratio of your company? (ii) In case you retain huge amount of profit of your company for long term investment, what financial decision do you take – to pay high cash dividend? Or to issue bonus share (stock dividend)? And explain why?You are told by your investment advisor that Ladumo Co. is expected to earn R5 per share next year, R6 per share the following year and that thereafter earnings are expected to grow by 8% per year. The dividend payout ratio is 60% and the required rate of return on Ladumo shares is 15%. If the current share price is R40, would you expect your advisor to make a buy, hold or sell recommendation? If transaction costs are R2.50 per share, would you follow his advice?