INTERMEDIATE FINANCIAL MANAGEMENT
INTERMEDIATE FINANCIAL MANAGEMENT
14th Edition
ISBN: 9780357516669
Author: Brigham
Publisher: CENGAGE L
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Chapter 12, Problem 14P

a)

Summary Introduction

To discuss: The annual incremental cash flows that will be available to undertake plan B rather than plan A.

b)

Summary Introduction

To determine: The rate of return would cause the cash flows from reinvestment to equal the cash flows from plan B.

c)

Summary Introduction

To determine: Whether the cost of capital is correct rate to assume for the reinvestment of a project’s cash flows.

d)

Summary Introduction

To discuss: The NPV profiles for plan A and B, and determine each project’s IRR, and indicate the crossover rate.

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You've collected the following information from your favorite financial website. 52-Week Price Dividend Hi 77.40 Lo Stock (Dividend) Yield % PE Ratio Close Price Net Change 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.04 70.05 YBM 2.55 2.9 10 89.08 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 20.74 Winter Sports .32 1.5 28 15.43 ?? -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 21 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent, indefinitely. Assume investors require a return of 14 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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INTERMEDIATE FINANCIAL MANAGEMENT

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