Risk free rate and cost of equity
Assume that the risk-free rate increases. What impact would this have on the cost of debt? What impact would it have on the cost of equity?
Assume that the risk-free rate increases. What impact would this have on the cost of debt? What impact would it have on the cost of equity?
Realized rates of return Stocks A and B have the following historical returns: Year Stock A's Returns, rA Stock B's Returns, rB 2001 (18.00%) (14.50%) 2002 33.00 21.80 2003 15.00 30.50
The Mann Company belongs to a risk class for which the appropriate discount rate is 10 percent. Mann currently has 100,000 outstanding shares selling at $100 each. The firm is contemplating the declaration of a $5 dividend at the end of the fiscal year that just began. Answer the following questions based on the Miller and Mo
Analyze the need for a financial consulting firm.
Honda Motor Company is going to pursue the list of items below. Explain fully how Honda can make the ideas work. Be creative. Explain where the funds will come from to fund the items below... end of life for older technologies, loans, sale of stock if a public firm, etc.? 1. Honda Motor Company should focus on making its ca
Assume a thirty year loan of B=$100,000, constant borrowing rate r = 9% , inflation rate f = 3% and monthly repayments (i.e. m=12). Compute monthly repayments.
At this point, you believe customers are now ready to begin risk analysis and understand the risk differences among various investments. The most basic fact you want to convey to them is risk and return?the greater the risk, the greater the expected return. From there, you want to explain how expected returns can be calculated g
After submitting your report, one of the new brokers asks the three questions below and requests a written response: 1) What are the economic functions financial intermediaries perform? 2) What is the role of broker in the financial market? 3) How has that role changed since the inception of on-line investing?
What are the three forms of business organization and what are the advantages and disadvantages of each form? For a corporation, what is the overall goal of the financial manager? What is the objective of this firm? Do you agree with this goal? Why or why not?
Share A has an expected return of 15% and standard deviation of 14%. Share B has an expected return of 23% and a standard deviation of 18%. Correlation between Share A & B is 0.3 Share A has 30% invested and Share B has 70%. (a) What is the expected return and the standard deviation of return on the portfolio? (b) Rec
A. Compute earnings per share for both firms. Assume a 25 percent tax rate. b. In part a, you should have gotten the same answer for both companies' earnings per share. Assuming a P/E ratio of 20 for each company, what would its stock price be? c. Now as part of your analysis, assume the P/E ratio would be 16 for the riski
Based on my team member's skills, Discuss the types of consulting firms that might use the skills of the team members. The firms I would like you to discuss are HR, financial, and logistics. The team member skills are: listening, flexibility, computer skills, communication skills, conflict resolution, and analysis skills.
Financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom times. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows:
Explain the following information for ABC Company, which is a publicly traded company that trades on the NYSE. 52-week range: Hi 70 Lo 30 Current stock price: 45 Dividend Yield: 2.50% Dividend per share: 1.125 P/E ratio: 19 Earnings per share: 2.37 Shares outstanding: 100 million Market capitalization: 4.
I need to research risk mitigation techniques for amazon.com. But I don't know exactly what these techniques are. Can you explain to me what a risk mitigation technique is, so I can fully research it for my paper?
I need to know step by step how to calculate the following: Loan Value: $1,594,600 Amortization: 15 Years Payments : Monthly Interest Rate: 7% a) How much is the Payment? b) How many months? c) How much of the payment is interest & How much is principle?
ABC, Inc. has a P/E ratio of 12 and maintains a dividend payout rate of 40%. The stock price of ABC, Inc. on January 1 is $32. What would the value of the stock be if the dividend payout ratio was 60%? (Please use Excel)
3-15: Compute the missing amounts for companies A, B, and C. A B C Cash . . . . . . . . . . . . . . . $45,000 $ 4,500 $18,000 Accounts receivable . . . . . . . . 10,000 10,000 14,000 Land and buildings . . . . . . . 75,000 ? 50,000 Accounts payable . . . . . .
A portfolio consists of 120 shares of Atlas stock, which sells for $50 per share, and 150 shares of Babcock stock, which sells for $20 per share. What are the weights of the two stocks in the portfolio?
Mower Manufacturing's income statement for January 2006 is given below. Sales (25,000 units × $25) $625,000 Less variable costs 468,750 Contribution margin $156,250 Less fixed costs 125,000 Profit $ 31,250 1. Calculate the company's break-even point in sales dollars and units. 2. The company is contemplating the pu
You are an analyst studying Beranek Technologies, which was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.50 dividend 3 years from today, then to increase it at a r
Gary Wells Inc. plans to issue perpetual preferred stock with an annual dividend of $6.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell? A. $90.37 B. $92.69 C. $95.06 D. $97.50 E. $100.00
WWW Servers just paid a dividend of D0 = $1.00. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on WWW's stock is 9.00%. What is the best estimate of the stock's current intrinsic value? A. $31.50 B. $32.31 C.
11. Default risk premium: A company's 5 year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% pre year, and the real risk free rate (r*) is 2.3 %. The average inflation premium is 2.5% and the maturity risk premium is estimated to be 0.1 x (t-1)%, where t=number of years to maturity. If
The partnership has arranged financing in the amount of $1, 034, 600 at 7%compounded semi-annually, with a 15 year amortization and 5 year term. a. How many months b. payment? c. Interest for first month.
Based on some information I need some guidance on how to figure out what the value of a share of common stock is: After-tax operating income=$500 million Depreciation expense=$100 million Capital expenditures=$200 million No change in net working capital Free cash flow is expected to grow by 6% per year Cost of equity is
4. Pierre Imports will be liquidated. Its current balance sheet is shown below. Fixed assets are sold for $900,000 and current assets are sold for $700,000. All fixed assets are pledged as collateral for mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $70,000. Sale of cu
1)Contribution margin may be express as: A) A percentage of revenue (B) A total dollar amount for the period (C) A contribution margin per unit (D) All of the above 2) Operating income can be calculated by: A) Fixed cost divided by contribution margin ratio (B) Fixed costs multiplied by contribution margin ratio (C) Margin
1) A process cost system is highly desirable when a company is producing custom made goods. A) True (B) False 2)All of the following are characteristics of the product of process costing except: A) High volume (B) Different amount of direct material (C) Identical amount of direct material (D) Repetitive operation 3) If 8
The two companies are Pepsico an Coca-Cola. http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=pep http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=KO