Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Boehm’s stock? Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year.
She conducted market research and found that after-tax cash flows on the investment should be about $15,000 per year for the next 7 years. The franchiser stated that Kay would generate a 20 percent return. Her cost of capital is 10 percent. Find the following: a) The PVB. Payment is 15000, 7 is N, FV is 0, 10 is the I/Y and compute for the PV b) The PVC.
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?
FIN- 515: Managerial Finance Homework 2: Chapter 3 Problems: (3-1) Days Sales Outstanding: Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year. DSO = Receivables / Ave. sales per day Receivables= DSO * Ave. sales per day = 20 * 20,000 Receivables= $400,000 (3-2) Debt Ratio: Vigo Vacations has an equity multiplier of 2.5.
Part a: 16105.1; Part b: 12762.82, 20113.57 3. It is estimated that in 5 years the total cost for one year of college will be $20,000. a. How much must be invested today in a CD paying 10.0 percent annual interest in order to accumulate the needed $20,000? 12418.43 b.
Basic present value calculations Calculate the present value of the following cash flows, rounding to the nearest dollar: a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return. Present Value | Rate per period | 0.567 | Cash Inflow | 12000 | Present Value | 6804 | b. An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return. Present Value | Rate per period | 5.66 | Cash Inflow | 16000 | Present Value | 90560 | c. A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3.
For simplification, 5-year-lived projects with 5 years of cash inflows are typically used throughout this chapter. Projects with usable lives equal to the number of years of cash inflows are also included in the end-of-chapter problems. It is important to recall from Chapter 4 that under the Tax Reform Act of 1986, MACRS depreciation results in n 1 years of depreciation for an n-year class asset. This means that in actual practice projects will typically have at least one year of cash flow
24. Jayadev Athreya has started his first job. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? • $2,667,904 • $5,233,442 • $1,745,600 • $3,594,524 25.
Calexico Hospital plans to invest $1.6 million in a new MRI machine. The MRI will be depreciated its 5-year economic life to a $200,000 salvage value. Additional revenues attributed to the new MRI will be in the amount of $1.5 million per year for 5 years. Additional operating expenses, excluding depreciation expense, will amount to $1 million per year for 5 years. Over the life of the machine, net working capital will increase by $30,000 over the life of the project.
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.