Imprudential, Incorporated, has an unfunded pension liability of $850 million that must be paid in 22 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 9.5 percent, what is the present value of this liability?

Imprudential, Incorporated, has an unfunded pension liability of $850 million that must be paid in 22 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 9.5 percent, what is the present value of this liability?

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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Similar questions

Imprudentlal. Inc, has an unfunded penslon lablity of $415 milion that must be pald In 20 years. To assess the value of the firm's stock, financial analysts want to discount this liabllity back to the present. If the relevant discount rate is 5.2 percent, what Is the present value of this liabilty? (Do not round Intermediate calculations and enter your answer in dollars, not milions, rounded to 2 decimal places, e.g., 1,2344.56789) Present value 254,774,000.22
The projected benefit obligation and plan assets were $80 million and $100 million, respectively, at the beginning of the year. Due primarily to favorable stock market performance in recent years, there also was a net gain of $30 million. On average, employees’ remaining service life with the company is 10 years. As a result of the net gain, what was the increase or decrease in pension expense for the year?
It is January 2023 and you are the CFO of MetrixSystems Corp. The firm only pays dividends. The firm is expecting earnings per share (EPS) of $10 at the end of this year. If the firm does not reinvest any of its earnings it will expect to achieve the same EPS of $10 each year in perpetuity. You are considering changing the dividend policy of the firm. Specifically, you want the firm to target a payout rate of 20% each year. The firm's return on new investment is 12.5% and its cost of equity capital (r) is 12%. Calculate the share price under the proposed payout policy. Select the best one. $93.75 -$2,250 $550 $83.33 O $100
Poulter Corporation will pay a dividend of $4.30 per share next year. The company pledges to increase its dividend by 7 percent per year, indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
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DFB, Inc. expects earnings next year of $4.48 per share, and it plans to pay a $2.54 dividend to shareholders (assume that is one year from now). DFB will retain $1.94 per share of its earnings to reinvest in new projects that have an expected return of 15.7% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 11.8%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $3.54 per share at the end of this year and retained only $0.94 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesti in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…
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DFB, Inc. expects earnings next year of $4.29 per share, and it plans to pay a $2.78 dividend to shareholders (assume that is one year from now). DFB will retain $1.51 per share of its earnings to reinvest in new projects that have an expected return of 14.3% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 11.7%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $3.78 per share at the end of this year and retained only $0.51 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…
XYZ Corp will pay a dividend of $4.80 per share next year. The company pledges to increase its dividend by 7.75 percent per year, indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
DFB, Inc. expects earnings next year of $5.99 per share, and it plans to pay a $4.36 dividend to shareholders (assume that is one year from now). DFB will retain $1.63 per share of its earnings to reinvest in new projects that have an expected return of 14.8% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 12.6%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $5.36 per share at the end of this year and retained only $0.63 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…

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