If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? =Preference Dividend/ Required Return= $7.5/ 6.5%= $ 115.38 13. The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P0?
c. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.
It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price? LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity.
2.Suppose your company needs to raise $30 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: an 8 percent semiannual coupon bond and a zero coupon bond. When find PV do 30m/PV to get the amount of coupon bonds.Part B: In 30 years, what will your company’s repayment be if you issue the coupon bonds? What if you issue the zeros? The repayment of the coupon bond will be the par value plus the last coupon payment times the number of bonds issued.
Questions 1. According to ValueLine estimates in Figure 1, James River’s expected annual dividend growth rate from the 91–93 to 97–99 period is 5.50%, and the next dividend (1995) is expected to be $0.60. Assume that the required return for James River was 8.36% on January 1 1995 and that the 5.50% growth rate was expected to continue indefinitely. a. Based on the Constant Growth Rate or Gordon Model, what was James River’s price at the beginning of 1995?
Financial Markets (N13302) Mock Paper (2010/2011) Question 1 (a) BSC Industries has just paid its annual dividend of $10 per share. The dividend is expected to grow at a constant rate of 5% indefinitely. The beta of BSC industries stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. (1) What is the intrinsic value of the stock? (2) What would be your estimate of intrinsic value if you believed that the stock was riskier, with a beta of 1.7?
Module 4 - BEATRICE PEABODY – Questions Alexandria Wiles 1. According to ValueLine estimates in Figure 1, James River’s expected annual dividend growth rate from the 91–93 to 97–99 period is 5.50%, and the next dividend (1995) is expected to be $0.60. Assume that the required return for James River was 8.36% on January 1 1995 and that the 5.50% growth rate was expected to continue indefinitely. a. Based on the Constant Growth Rate or Gordon Model, what was James River’s price at the beginning of 1995?
$27 c. By what amount did the company's paid-in capital increase during 20X6? $1,724,000 d. Did Star's total legal capital increase or decrease during 20X6? By what amount? $680,000 increase 2. Bond computations: Straight-line amortization Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1.
Questions 1. According to ValueLine estimates in Figure 1, James River’s expected annual dividend growth rate from the 91–93 to 97–99 period is 5.50%, and the next dividend (1995) is expected to be $0.60. Assume that the required return for James River was 8.36% on January 1 1995 and that the 5.50% growth rate was expected to continue indefinitely. a. Based on the Constant Growth Rate or Gordon Model, what was James River’s price at the beginning of 1995?
Fixed expenses are $424,000 per month. The marketing manager believes that a $7,000 increase in the monthly advertising budget would result in a 100 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? A. Increase of $8,000 B.