Pullman, Inc., a U. S. firm, has been highly profitable, but prefers not to pay out higher dividends because its shareholders want the funds to be reinvested. It plans for large growth in several less developed countries. Pullman would like to finance the growth with local debt in the host countries of concern to reduce its expo
Drexel Co. is a U.S. based company that is establishing a project in a politically unstable country. It is considering two possible sources of financing. Either the parent could provide most of the financing, or the subsidiary could be supported by local loans from banks in that country. Which financing alternative is more appro
Wizard, Inc., has a subsidiary in a country where the government allows only a small amount of earnings to be remitted to the United States each year. Should Wizard finance the subsidiary with debt financing by the parent, equity financing by the parent, or financing by local banks in the foreign country?
Provide computation and formulas on how to calculate the following: 1. Hughes Technology has had net income of $450,000 in the current fiscal year. there are 100,000 shares of common stock outstanding with convertible bonds, which have a total face value of $1.2 million. the $1.2 million is represented by 1,200 different $1,0
The last dividend paid by xyz company was 1.00. XYZ growth rate is expected to be a constant 5%. XYZ's required rate of return on equity(ks) is 10%. What is the current price of XYZ's Common Stock? XYZ Corp. budgeted mnthly sales are 4500. 40% of it customers pay in the first month and take 1% discount. the remaining 60% pay
West corporation has 50000, which it plans to invest in the marketable sercurities. the corporation is choosing between the following three eually ricl sercurities:alachua county tax free municipal bonds yielding 6 percent; Exxon yielding 9.5 percent; GM preferred stock with dividend yield of 9 percent. West's corporate rate is
Ch. 9: Problem A5 (p. 236) (Investment criteria) Compute the NPV, IRR, and payback period for the following investment. The cost of capital is 10%. Year 0 1 2 3 Cash flow −200,000 100,000 100,000 150,000
(Finding NPVs with differing project risks) Assume the expected return on the market portfolio is 15% and the riskless return is 9%. Also assume that all of the projects listed here are perpetuities with annual cash flows (in $) and betas as indicated. None of the projects requires or precludes any of the other projects, and eac
1. An analysis and aging of accounts receivable of the Lucille Company at December 31, 2007, showed the following: Accounts Receivable $840,000 Allowance for Doubtful Accounts (before adjustment) 36,000 (cr) Accounts estimated to be uncollectible 76,800 Compute the net realizable value of the accounts receivable of Lucill
Nickel Industries is considering the purchase of a new machine that will cost $178,000, plus an additional $12,000 to ship and install. The new machine will have a 5 year useful life and will be depreciated using the straight line method. The machine is expected to generate new sales of $85,000 per year and is expected to increa
Price Controls and Equilibrium: The issue of price setting and price controls is great political and social as well as economic interest; it's often very hard to separate these dimensions. Consider an article that deals with the always hot topic of the minimum wage law. This is an area of great political, social, and economic in
Vid-saver, Inc., has five activity cost pools and two products (a budget tape rewinder and a deluxe tape rewinder). Information is presented below: Activity Cost Cost Estimated Cost Driver by Product Pool Driver Overhead Budget Deluxe Ordering & Receiving Orders $110,000 600
1. Find the intrinsic value of a common stock that last paid a quarterly dividend of $.03 if there is no expected growth in dividends and your required rate of return is 10%. 2. What if dividends are expected to grow at a rate of 6% per year indefinitely.
Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new plan
1. To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $875, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in
Many corporate acquisitions result in losses to the acquiring firms' stockholders. Accordingly, why do firms purchase other corporations? Are they simply paying too much for the acquired corporation? A co-worker asks your opinion. Specifically state the reasons for your argument.
Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new
Why is a sunk cost excluded (I think they are sunk because the manager is in the process of sinking the company) while opportunity cost (opportunity for what?) is included? Moreover, why is externality cost (external to my office, my company, or my comprehension) included in financial analyses?
DPS CALCULATION Warr Corporation just paid a dividend of $1.50 a share (that is, D= $1.50). The dividend is expected to grow 7% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? CONSTANT GROWTH VALUATION Harrison Clothiers' stock currently sel
If the assets are tangible and the market can supply meaningful valuations then you could say that the value of the firm is the assets-in a perfect world. Another approach is to look at the discounted cash flow that the firm generates. Further, if we look at the value of a firm's stock assuming that the market can fairly value
6. You have been assigned the task of using the free cash flow model to estimate Petry Corporation's intrinsic value. Petry's WACC is 10.00%, its end-of-year free cash flow (FCF) is expected to be $150.0 million, the FCFs are expected to grow at a constant rate of 6.00% a year in the future, the company has $200 million of long-
4. The Zumwalt Company is expected to pay a dividend of $2.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?
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?
The Zumwalt Company is expected to pay a dividend of $2.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?
McDonnell Manufacturing is expected to pay a dividend of $1.50 per share at the end of the year (D1 = $1.50). The stock sells for $34.50 per share, and its required rate of return is 11.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
You will receive $5,000 three years from now. The discount rate is 8 percent. a. What is the value of your investment two years from now? Multiply $5,000 .926 (one year's discount rate at 8 percent). b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one year's discount rate at
1) Why do many business managers feel that ethical behavior is essential to the profitability and survival of their firm? 2) Your Uncle left you a some of money and you need to calculate what is the most fiscally beneficial way to receive your payout. There are 3 options: 1. Take $10,000 now 2. Take 8 $2,000 payments at t
You are a shareholder in a S corporation. The corporation earns $2 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The S corporation tax rate is 40% and the personal tax rate on (both dividend and non-dividend) income is 30%. How much is left for you after al
The price of stock will be either $60 or $80 at the end of year. Call options are available with one year to expiration. T-bills currently yield 5 percent. Suppose the current price of stock is $70. What is the value of the call option of the exercise price is $45 per share?
You do a study and find out that on average stock prices for firms decrease 3% evfor every 5% decrease in inside ownership. you are watching teh nightly business report and find out hat Magic Tape's stock has announced that insiders have sold 10% of their holdeing .. You are concerned because you own 1,000 shares of Magic Tape