Finance Questions
Not what you're looking for?
1. An investment costs $3,000 today and provides cash flows at the end of each year for 20 years. The investment's expected return is 10 percent. The projected cash flows for years 1, 2, 3 are $100, $200, and $300 respectively. What is the annual cash flow received for each of the years 4 through 20 (17 years)? (Assume the same payment for each of these years.)
2. A financial analyst has been following Johns Inc., a new high-growth company. She estimates that the current risk-free rate is 6.25 percent, the market risk premium is 5 percent, and that John's beta is 1.75. The current earnings per share is $2.50. The company has a 40 percent payout ratio. The analyst estimates that the company's dividend will grow at a rate of 25 percent this year, 20 percent next year, and 15 percent the following year. After three years the dividend is expected to grow at a constant rate of 7 percent a year. The company is expected to maintain its current payout ratio. The analyst believes that the stock is fairly priced. What is the current price of the stock?
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to answer the request of the assignment of more than 400 words of text.
Solution Preview
Step- by-Step solutions to the following two questions:
1. An investment costs $3,000 today and provides cash flows at the end of each year for 20 years. The investment's expected return is 10 percent. The projected cash flows for years 1, 2, 3 are $100, $200, and $300 respectively. What is the annual cash flow received for each of the years 4 through 20 (17 years)? (Assume the same payment for each of these years.)
0 1 2 3 4 20
We need to use both present value and present value of annuity to solve this problem.
PV = FV x 1 where PV is the present value
(1 + i)n FV is ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.