Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock is 20 percent of value. Operating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?

Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock is 20 percent of value. Operating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?

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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Company Q's current return on equity (ROE) is 20%. It pays out 45 percent of earnings as cash dividends (payout ratio 0.45). Current book value per share is $56. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next two years. After that, competition forces ROE down to 10.0% and the payout ratio increases to 0.80. The cost of capital is 11.0%. Question: What is Q's stock worth per share? O 106.1 O 121.7 O 111.6 118.2 O 74.9
Halliford Corporation expects to have earnings this coming year of $2.879 per share. Halliford plans to retain all of its earnings for the next two years. Then, for the subsequent two years, the firm will retain 48% of its earnings. It will retain 18% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 22.9% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 9.7%, what price would you estimate for Halliford stock? The stock price will be $. (Round to the nearest cent.)
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Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock 20 percent of valueOperating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?
If the price per share of a company is $500, the current dividend (just paid) is $50 per share, that dividend is expected to grow at 5% per year and with no stock issuance cost, then the cost of financing new projects with stock issuance for that company is (A.E. annual effective):

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