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Calculating firm value for overtime corporations

Problem: Overtime Corporation expects an EBIT of $35,000 every year forever. Overtime Corporation currently has no debt, and its cost of equity is 14 percent. The company can borrow at 8 percent. If the corporate tax rate is 38 percent, what is the value of firm? What will the value be if the company converts to 50 percent debt

Crisp's Cookware: Calculate the expected price of the stock in 3 years.

You are considering an investment in the common stock of Crisp's Cookware. The stock is expected to pay a dividend of $2 a share at the end of the year D1=$2. The stock has a beta equal to.0.9. The risk free rate is 5.6%, and market risk premium is 6%. The stock's dividend is expected to grow at some constant rate g. The stock

Finance: Estimate the current stock price given expected dividend growth.

A company currently pays dividend of $2 per share, Do=$2. It is estimated that the company's dividend will grow at rate of 20% per year for the next 2 years; then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal 1.2, the risk-free is 7.5%, and the market premium is 4%. What is

Estimate the Stock's Current Price Given Dividend Growth

A company currently pays dividend of $2 per share, Do=$2. It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years; then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal 1.2, the risk-free is 7.5%, and the market premium is 4%. Questi

Finance problem: Share valuation

Bohen Inc is expexted to pay $1.50 per share dividend of the year (i.e, D1=$1.50). The dividend is expected to grow at constant rate of 7%. The required rate of return on the stock r is 15%. What is the value per share of company's stock.

Finance: Calculate the future value of increasing payments for five years

Let's say you are interested in saving money for a possible investment. Your plan is to make regular deposits into an account which will earn 14 percent. Your first deposit of $5,000 will be at the beginning of next year. You also plan to make four additional deposits at the beginning of each of the next four years. Your plan is

Questions involving a company's finances

The basket of goodies costs $300, and is expected to cost $515 next year. The real rate of interest is 2%. Our company, Basic, Inc. has a bond risk premium of 2.5% and a preferred stock risk premium of 3%. The Market Risk Premium is 4% and Basic has a Beta of 1.25. Basic's target capital structure is 40% debt, 50% common s

Total liabilities and comprehensive income for General Mills Inc.

The following numbers appeared in the annual report of General Mills, Inc., the consumer foods manufacturer, for the fiscal year ending May 2008 (in millions of dollars): Fiscal 2008 Fiscal 2007 Total assets 19,042 18,184 Total stockholders' equity 6,216 5,319 Total revenues 13,652 12,442 Common share issues 1,133 504 Co

Enterprise Market Value of Hp

A. General Mills, Inc., the large manufacturer of packaged foods, reported the following in its annual report for the year ending May 25, 2008 (in millions): Short-term borrowing $ 442.0 Long-term debt 4,348.7 Stockholders' equity 6,215.8 The short-term borrowing and long-term debt are carried on the balance sheet at app

Grotius Corporation Patent Amortization

A patent was acquired by Grotius Corporation on January 1, 2000, at a cost of $72,000. The useful life of the patent was estimated to be 10 years. At the beginning of 2004, Grotius spent $9,000 in successfully prosecuting an attempted infringement of the patent. At the beginning of 2005, Grotius purchased a patent for $25,000 th

Bank Loan

I need assistance with the following: The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though

Finance Problems: Investments

1) Stock A has the following probability distribution of expected returns. What is Stock A's expected rate of return and standard deviation? . Probability________Rate of Return 0.1.............................-15% 0.2.................................0 0.4................................5 0.2............................10

Pension amortization-Calculating Expense

Hello, I do not seem to find my notes on the years-of-service method in calculating and my book is not explaining it well enough. Can someone show me how to do this? On January 1, 2003, Sunny Incorporated amended its pension plan which caused an increase of $4,800,000 in its projected benefit obligation. The company has 40

Steps to Determine the Contribution Margin

Har Company sold 5,000 units for a prie of $50 per unit and had the following information: Variable expenses - $160,000 Fixed expenses - $125,000 Break-even point $347,222 If the sales price per unit were to increase by 10%, variable expenses were to increase by 12.5% and fixed expenses were to increase by 20%, what woul

Cash Budget - The Sharpe Corporation

I need assistance on completing this example. (Cash budget) The Sharpe Corporation's projected sales for the first eight months of 2004 are as follows: January $ 90,000 May $300,000 February 120,000 June 270,000 March 135,000 July 225,000 April 240,000 August 150,000 Of Sharpe's sales, 10 percent is for cash, another 60

Assessing Financial Markets

1. The U.S. Treasury issues bills, notes, and bonds. How do these three securities differ? 2. A call provision on a bond allows the issuer to redeem the bond at will. Investors do not like call provisions and so require higher interest on callable bonds. Why do issuers continue to issue callable bonds anyway? EBay went pub

The solution to High-Low method

High-Low Method Manchester Foundry produced 45,000 tons of steel in March at a cost of £1,150,000. In April, the foundry produced 35,000 tons at a cost of £950,000. Using only these two data points, determine the cost function for Manchester. What is the slope?

Monthly Percentage Price Change for Four Market Indexes

The following are monthly percentage price changes for four market indexes MONTH DJIA S&P500 RUSSELL2000 NIKKEI 1 0.03 0.02 0.04 0.04 2 0.07 0.06 0.1 -0.02 3 -0.02 -0.01 -0.04 0.07 4 0.01 0.03 0.03 0.02 5 0.05 0.04 0.11 0.02 6 -0.06 -0.04 -0.08 0.0

Business Finance

1.Nico bought 100 shares of Cisco Systems stock for $24.00 per share on January 1, 2002. He received a dividend of $2.00 per share at the end of 2002 and $3.00 per share at the end of 2003. At the end of 2004, Nico collected a dividend of $4.00 per share and sold his stock for $18.00 per share. What was Nico's realized return du


1.The financial leverage multiplier is an indicator of a corporation utilizing 1.long-term debt. 2.total debt. 3.total assets. 4.operating leverage. 2.The analyst should be careful when conducting ratio analysis to ensure that 1.the same accounting procedures were used. 2.all of these 3.the d

Portfolio of Stocks

Demonstrate to your colleagues how you would calculate the expected rate of return, also called r-hat, and Beta on a self-designed portfolio of four common stocks selected from the NASDAQ or NYSE stock exchanges. Assume the weighting of the portfolio to be 15%, 30%, 35%, 20%. No two portfolios presented by students can include t

Assessing Bankruptcy Laws

I do a lot of work with smaller companies that are in severe financial difficulty. I constantly hear comments, from others, that bankruptcy is a "dodge" and it allows less than honest business owners to scam their creditors and emerge "clean". Do you think that the bankruptcy laws are necessary, are fair and are good for the

Positive Covariances of Returns

Why do most assets of the same type show positive variances of returns with each other? Would you expect positive covariance of returns between different types of assets such as return on treasury bills, General Electric common stock, and commercial real estate? Why or why not?