Given the following cash flow stream at the end of each year: Year 1: $4,000 Year 2: $2,000 Year 3: 0 Year 4: -$1,000 Using a 10% discount rate, the present value of this cash flow stream is: a. $4,606 b. $3,415 c. $3,636 d. Other 8. Consider a 10-year annuity that promises to pay out $10,000 per year, given this is an ordinary annuity and that an investor can earn 10% on her money, the future value of this annuity, at the end of 10 years, would be: a. $175,312 b.
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.
P0= D1/ Dividend yield= $26.67 P7= P0 *(1+11%)^7= $ 55.36 15. Nachman Industries just paid a dividend of D0 = $1.32. 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 this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value?
With this new development, if we assume that the previous 4,796,000 shares of common stock that were originally issued in March of 1993 are now also worth $1 per share, this gives a total of $4,796,000. The total valuation of the company will then be $800,000 + $4,796,000 = $5,596,000. This is the value that we believe to represent the valuation of Neverfail as of November 1994. After round 1 of VC investment: Due to the deal with the Pacific Ridge, Neverfail share prices were going for $1.50 per share The Company was valued at $9 million as of December 1994 according to the case study. Initial value of Pacific ridge investment (December 1995) is: 666,667 * $1.50 + 133,333 * $0.3 = $1,040,000.4 (initial investment, exhibit 7).
A company issued a 30-year, $1,000 par value bond that has 10.85% coupon rate. Coupons are paid out semi-annually and the relevant interest rate is 9% compounded semiannually. a. (3 points) What was the value of this bond when it was issued? PMT = (.1085/2)*1000=54.25 N = 60 R = 0.09/2=0.045 (or 4.5 for calculator purposes) FV = 1000 PV =?
b. What is the relationship between dividend yield and capital gains yield over time under constant growth assumptions? They both remain constant 3. A successful joint venture is expected to result in the 4.0% growth rate until 2000 but would increase the company’s normal growth rate to a constant 8.00% after that time. The joint venture also is expected to increase investors’ required return to
After the first year’s decrease, there is a 1.5% to 2% increase expected in the iron ore shipments from year 2002 onwards. This implies that the expected cash flows are expected to increase over time 2- Book Value of the ship is $ 39,000,000. Present value of the ship after discounting payments @ 9% is $ 33,738,397 3- Assuming a discount rate of 9% and tax rate of 35%, and the ship is sold for scrap after 15 years for $ 5,000,000, the NPV of
b. The future value of $800 saved each year for 10 years at 8 percent. c. The amount that a person would have to deposit today (present value) at a 6 percent interest rate in order to have $1,000 five years from now. d. The amount that a person would have to deposit today in order to be able to take out $500 a year for 10 years from an account earning 8 percent. Solution: a.
Chapter 8: Date placed in service (see concept summary 8.1 in the text). The applicable system of depreciation or cost recovery is dependent on the date the property is placed in service. The small business jobs act of 2010 extended 50% additional first-year depreciation for qualified property acquired and placed in service before january 1, 2011. The tax relief act of 2010 extended additional first-year depreciation for qualified property acquired and placed in service before january 1, 2013. The percentage is 100% for property placed in service after september 8, 2010 and before january 1, 2012.
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?