A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.75 percent for the next five years. After that, you expect the company to grow 3.75 percent in perpetuity. The company has a 14 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the

A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.75 percent for the next five years. After that, you expect the company to grow 3.75 percent in perpetuity. The company has a 14 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the

Name: A company had $20 of sales per share for the year thatjust ended. You
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Description: A company had $20 of sales per share for the year thatjust ended. You expect the company to grow their salesat 6.75 percent for the next five years. After that, youexpect the company to grow 3.75 percent in perpetuity.The company has a 14 percent RO

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company has profits of $393,000 this year and expects profits to decrease by 4% per year over the next 12 years. If the profits will be continuously invested in an account bearing 7% APR compounded continuously, what is the 12-year present value of this income stream? Round your answer to two decimal places. Do not include units.
An all-equity firm had a dividend expense of $45,000 last year. The market value of the firmis $800,000 and the dividend is expected to increase at 7% each year. What is the cost of the equity for the firm?
Company has expected earnings of $4.8 per share for next year. The firm's ROE is 16%, and its earnings retention ratio is 55%. If the firm's market capitalization rate is 12%, what is the present value of its growth opportunities?
You are valuing a bank. The bank currently has assets of $330 per share. Five years from now (that is, at the end of five years), you expect their assets per share to be $470. After Year 5, you expect their assets per share to grow at 3.25 percent per year forever. The bank has an ROA of 2.0 percent and an ROE of 13.0 percent. The bank's cost of equity is 11.5 percent. What is the value of the bank's stock? Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent. 69
Ocasa Ltd. Just paid a dividend of $6.00 per share next year, and that the dividend will grow at the same rate as its profits. High profits are expected during this period, with the first three years of growth estimated to be 13%, 11% and 10% respectively, before returning to constant long+ term industry growth rate of 6% per year. The firm’s cost of equity is 15%. i. What is the firm’s share price today (P0)? ii. What is the expected share price next year (P1)? iii. Calculate the dividend yield for year 2. iv. Calculate the current capital gains yield (year 1).
Please explain each step and please show your work in excel and please explain each step and answer thoroughly. Miami Book Publishers (MBP) just reported earnings of $20 million, and it plans to retain 35 percent of its earnings. If MBP’s historical return on equity (ROE) was 15 percent, what is the expected growth rate for MBP’s earnings?
Mercury Satellite Corporation earned $20 million for the fiscal year ending yesterday. The firm's policy is to pay out 30 percent of its earnings as dividends. The remaining 70 percent of earnings is retained by the company for use in projects. The company has 2 million shares of common stock outstanding. The current stock price is $90. The historical return on equity (ROE) of 15 percent is expected to continue in the future. What is the required rate of return on the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
NHL Inc.’s current return on equity (ROE) is 20%, its current book equity per share is $50, and it pays out half of its earnings as dividends. Both the ROE and payout ratio will stay constant for the next two years. After year 2, competition will force ROE down to 8%, and NHL will increase its payout ratio to 75%. The cost of capital is 10%. What is NHL’s stock price today?
's current profits are $900,000. These profits are expected to grow indefinitely at a constant annual rate of 2tunity cost of funds is 4 percent, determine the value of the firm:actions: Enter your responses rounded to one decimal place.instant before it pays out current profits as dividends. millione instant after it pays out current profits as dividends.million
Your firm has an ROE of 12.1%, a payout ratio of 27%, $594,200 of stockholders' equity, and $386,100 of debt. If you grow at your sustainable growth rate this year, how much additional debt will you need to issue?
Pearl Corp. is expected to have an EBIT of $2,000,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $85,000, and $125,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $10,500,000 in debt and 850,000 shares outstanding. At Year 5, you believe that the company's sales will be $14,850,000 and the appropriate price-sales ratio is 2.2. The company’s WACC is 8.5 percent and the tax rate is 22 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
International Inc. is an outdoor furniture company that is planning to considerably grow over the coming years. Gaining very good reputation with its high-quality products , the company is projecting that it can grow at 10% over the coming 4 years and then the growth rate will decrease to 3% thereafter. Its earning per share (EPS) this year was $4 and the company,s dividend pay-out ratio was 30% that is its most recent dividends was $1.2. In order to finance this growth, the company needs to invest in new machinery and working capital. 1) If the company chooses to raise equity, what would be the expected price/share given the projected growth rates and given that the expected return on the company,s equity is 15% (assume the company uses the dividend discount model). 2) If the company instead decides to take an amortizing loan from its bank, the maximum loan value would be $10M which will be just enough to finance the necessary expansion. If the Annualized Percentage Rate (APR) that…

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