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Excluding announcement effects, which of the following statements suggest the residual dividend model is similar to the MM dividend irrelevance model?
Distinguish between the money and capital markets.
Compare the incentives of manufacturers to design safe products under the following scenarios for products liability.
If the required return on both these bonds is 9 percent compounded semiannually, what is the current price of bond M? Of bond N?
Suppose your company needs to raise $20 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent, and you're evaluating two issue
Which of the following is most likely to occur if a firm over-invests in net working capital?
What is the risk premium on the market? What is the required return on an investment with a beta of 1.5? If an investment with a beta of .8 offers an expected return of 9.8%, does it have a positive N
The underlying stock pays no dividends, its current price is $107, and you believe it has a 50% chance of increasing to $130 and a 50% chance of decreasing to $84. The risk-free rate of interest is
Ta.com has a beta of 1.24, a stock price of $22, and recently paid an annual dividend of $0.94 a share. The dividend growth rate is a 4.5 percent. The market has a 10.6 percent rate of return and a
Suppose a dividend that pays at $1.07 has a growth rate of 20% for the first 3 years. After the 3 years, there is a long-run growth rate of 8%. The stock has a required rate of return of 12.4%. Find
Analyze the returns for the investor's proposed strategy. What is your recommendation?
Company A decides to reduce its dividend rate to 40%, and expects that the growth rate will increase as a result of the higher retained earnings to 9% per year.
Assume that for next year the Risk Free Rate is expected to be 2% and that the overall Market will realize a return of 12%. Using the CAPM / SML methodology, calculate the required returns for Asset
Fama's Llamas has a weighted average cost of capital of 9.6 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.9 percent. The tax rate is 35 percent. What is the c
Sixx AM Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 13 percent, and its cost of debt is 6 percent. If the tax rate is 35 percent, what is the company's WACC? (show all
What is the projected dividend for next year? What is the current value of the stock using the Dividend Discount Model?
It is industry has typically displayed a Value /EBITDA ratio of between 5x and 6x EBITDA. If Company D has 20 million shares outstanding, what is the estimate of the per share value of the company?
An individual work full-time for salary but part-time as an accountant in the evenings and on weekends. Which of the following plans is suitable if this employee wants to establish a plan based on
The cost of financing with retained earnings is re = 12%, the cost of preferred stock financing is rPS = 7%, and the before-tax cost of debt is rd = 9%. Calculate the weighted average cost of capita
A company issues 15-year, $1,000 par-value bonds, with a coupon rate of 5%. The bonds are sold for $619.70. The tax rate is 30%. Compute the cost of debt before taxes and after taxes.
Preston Industries has a WACC of 11.78 percent. The capital structure consists of 60.7 percent equity and 35.7 percent debt. The aftertax cost of debt is 6.2 percent and the cost of equity is 14.90
Fama's Llamas has a weight average cost of a capital of 9.6 percent. The Company cost of equity is 12 percent, and its pretax cost of debt is 7.9 percent. The tax rate is 35 percent. what is the com
SIxx AM Manufacturing has target debt-equity ratio of .45. Its cost of equity is 13 percent, and its cost of debt is 6 percent. If the tax rate is 35 percent, what is the company's WACC
Marvin's Interiors issued 9-year bonds 2 years ago. The bonds have a face value of $1,400, a 9.0 percent, semiannual coupon, and a current market price of $1,189. What is the pre-tax cost of debt?
What is the present value of an ordinary annuity of $1500 per year that will be received in 5 years assuming an interest rate of 12%?