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Finance
stocks a and b have the following data. assuming the stock market is efficient and the stocks are in equilibrium, whic of the following statements is correct?
a, these two stocks should have the same price
b, these two stocks must have the same dividend yield
c, these two stocks should have the same exoected return
d, these two stocks must have the same expected capital gains
e, these two stocks must have the same expected year end dividend
a, these two stocks should have the same price
b, these two stocks must have the same dividend yield
c, these two stocks should have the same exoected return
d, these two stocks must have the same expected capital gains
e, these two stocks must have the same expected year end dividend
Finance
The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value
Finance
1. Successful Services Affiliates (SSA) is considering three new projects, each requiring an initial equipment investment of $21,000. Each project will last for 3 years and produce the following cash flows:
Year Project 1 Project 2 Project 3
1 $ 7,000 $ 9,500 $13,000
2 9,000 9,500 10,000
3 15,000 9,500 11,000
Total $31,000 $28,500 $34,000
The equipment has no salvage value and SSA uses straight-line depreciation. SSA will not accept any project with a payback period over 2 years. Their minimum required rate of return is 12%.
a) Compute each project's payback period, including the most desirable project and the least desirable project using this method. (Round to two decimals).
b) Compute the NPV for each project. (Round to the nearest dollar.)
What is your conclusion?
Year Project 1 Project 2 Project 3
1 $ 7,000 $ 9,500 $13,000
2 9,000 9,500 10,000
3 15,000 9,500 11,000
Total $31,000 $28,500 $34,000
The equipment has no salvage value and SSA uses straight-line depreciation. SSA will not accept any project with a payback period over 2 years. Their minimum required rate of return is 12%.
a) Compute each project's payback period, including the most desirable project and the least desirable project using this method. (Round to two decimals).
b) Compute the NPV for each project. (Round to the nearest dollar.)
What is your conclusion?
Finance
Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A B
Price $25 $25
Expected growth (constant) 10% 5%
Required return 15% 15%
a. Stock A's expected dividend at t = 1 is only half that of Stock B.
b. Stock A has a higher dividend yield than Stock B.
c. Currently the two stocks have the same price, but over time Stock B's price will pass that of A.
d. Since Stock A’s growth rate is twice that of Stock B, Stock A’s future dividends will always be twice as high as Stock B’s.
e. The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.
A B
Price $25 $25
Expected growth (constant) 10% 5%
Required return 15% 15%
a. Stock A's expected dividend at t = 1 is only half that of Stock B.
b. Stock A has a higher dividend yield than Stock B.
c. Currently the two stocks have the same price, but over time Stock B's price will pass that of A.
d. Since Stock A’s growth rate is twice that of Stock B, Stock A’s future dividends will always be twice as high as Stock B’s.
e. The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.
Finance
•Drawing on what you discovered in the e-Activity, discuss how instances of corporate mismanagement or fraud should be taken into account when assessing the risks associated with certain types of investments.
Finance
abc ltd is considering whether to invest $900,000 in the purchase of new item of equipment in 2012. the equipment would be paid for with a down payment of $600,000 and the payment of the remaining $300,000 six weeks later the company has already spent 80000 on design and feasibility work, and the operational management team are keen to purchase the the equipment quickly. the equipment is expected to have a life fo three years, after which time it should have a resale value of $50,000. the equipment will be depreciated by the straight-line method over three years. it has been estimated that an investment of $200,000 in working capital must be maintained at all times, but this investment is fully recoverable at the end of the useful life. as a result of acquiring the equipment, it is expected that there will be an increase in annual cash profits, as follows:
2012: $370,000 2013: $480,000 2014: $260,000
the company cost of capital is 10%
How to calculate the Net present value And Internal rate of return
2012: $370,000 2013: $480,000 2014: $260,000
the company cost of capital is 10%
How to calculate the Net present value And Internal rate of return
Finance
Howton & Howton Worldwide (HHW) is planning its operations for the coming year, and the CEO wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 50%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions.
Finance
Discuss the non-rational factors that may have a role in the valuation of stocks and stock market equilibrium. Provide specific examples to support your response.
Finance
The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
Finance
A project has an initial requirement of $698,700 for fixed assets and $61,000 for net working capital. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and will be worthless at the end of the project. All of the net working capital will be recouped after 4 years. The expected annual operating cash flow is $218,000. What is the project's internal rate of return if the tax rate is 35 percent?
Answer 7.72 percent
8.41 percent
8.69 percent
9.11 percent
9.97 percent
.
Answer 7.72 percent
8.41 percent
8.69 percent
9.11 percent
9.97 percent
.
