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Investment Returns Calculations

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9-4) Stock Values: White Wedding Corporation will pay a $3.05 per share dividend next year. The company pledges to increase its dividend by 5.25 percent per year, indefinitely. If you require an 11 percent return on your investment, how much will you pay for the company's stock today?

10-23) Calculating Investment Returns: You bought one of Bergen Manufacturing Co.'s 7 percent coupon bonds one year ago for $943.82. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today when the required return on the bonds is 8 percent. If the inflation rate was 4.8 percent over the past year, what would be your total real return on the investment?

11-4) Portfolio Expected Return: You have $10,000 to invest in a stock portfolio. Your choices are stock X with an expected return of 16 percent and stock Y with an expected return of 10 percent. If your goal is to create a portfolio with an expected return of 12.9 percent, how much money will you invest in stock X? In Stock Y?

13-7) Calculating WACC: Mullineaux Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its cost of equity is 15 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent. What is Mullineaux's WACC.

13-9) Finding the Capital Structure: Fama's Llamas has a weighted average cost of capital of 9.8 percent. The company's cost of equity is 15 percent, and its cost of debt is 7.5 percent. The tax rate is 35 percent. what is Fama's debt-equity ratio?

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Solution Summary

The real return on the bond is clearly evaluated in these 5 economics questions.

See Also This Related BrainMass Solution

Calculation of Internal rate of return (IRR) for Berkshire's investment in GEICO

See the attached file.

'Using the GEICO dividend Payment history in Exhibit 8 of the case, calculate the IRR on Berkshire's $45.7M investment in GEICO (assuming it was all)in 1976 which grew in value to $1.909 billion by 1994.'

I'd like a detailed explanation of how to make the calculation with an example using very similar (or preferably the same)figures to those shown in the case

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