PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 27, Problem 10PS
a)
Summary Introduction
To determine: The
b)
Summary Introduction
To determine: The rate of return of person B in yen.
c)
Summary Introduction
To determine: The way person B hedged and her rate of return in yen.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Wilbur and Orville are brothers. They're both serious investors, but they have different approaches to valuing stocks. Wilbur, the older brother, likes to use the
dividend valuation model. Orville prefers the free cash flow to equity valuation model. As it turns out, right now, both of them are looking at the same stock-Wright
First Aerodynmaics, Inc. (WFA). The company has been listed on the NYSE for over 50 years and is widely regarded as a mature, rock-solid, dividend-paying stock.
The brothers have gathered the following information about WFA's stock:
Current dividend (D) = $2.30/share
Current free cash flow (FCF) = $1.5 million
Expected growth rate of dividends and cash flows (g) = 5%
Required rate of return (r) = 14%
Shares outstanding 500,000 shares
How would Wilbur and Orville each value this stock?
Company
P/S Multiples
Facebook
13.33
Snap
18.22
Twitter
13.27
The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $8 million but realizes after-tax inflows of $4.5 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $17 million and realizes after-tax inflows of $4 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 13%. Using the replacement chain approach to project analysis, by how much would the value of the company increase if it accepted the better machine? Round your answer to two decimal places.
1.) $ million
Chapter 27 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 27 - Exchange rates Look at Table 27.1. a. How many...Ch. 27 - Exchange rates Table 27.1 shows the 3-month...Ch. 27 - Prob. 3PSCh. 27 - Prob. 4PSCh. 27 - Prob. 5PSCh. 27 - Prob. 6PSCh. 27 - Prob. 8PSCh. 27 - Prob. 9PSCh. 27 - Prob. 10PSCh. 27 - Currency risk Companies may be affected by changes...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Wilbur and Orville are brothers. They're both serious investors, but they have different approaches to valuing stocks. Wilbur, the older brother, likes to use the dividend valuation model. Orville prefers the free cash flow to equity valuation model. As it turns out, right now, both of them are looking at the same stock-Wright First Aerodynmaics, Inc. (WFA). The company has been listed on the NYSE for over 50 years and is widely regarded as a mature, rock-solid, dividend-paying stock. The brothers have gathered the following information about WFA's stock: Current dividend (D) = $3.30/share Current free cash flow (FCF) = $1.5 million Expected growth rate of dividends and cash flows (g)=8% Required rate of return (r) = 13% Shares outstanding 500,000 shares How would Wilbur and Orville each value this stock? The stock price from Wilbur's valuation is $ (Round to the nearest cent.)arrow_forwardThe Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $8 million but realizes after-tax inflows of $4.5 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $17 million and realizes after-tax inflows of $4 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 13%. Using the replacement chain approach to project analysis, by how much would the value of the company increase if it accepted the better machine? Round your answer to two decimal places. 1.) $ million What is the equivalent annual annuity for each machine? Do not round intermediate calculations. Round your answers to two decimal places. 2.) Machine A: $ million 3.) Machine B: $ millionarrow_forwardYou expect to have $29,865. You plan to make X savings contribution of $1,690 per month. The expected return is 0.92 percent per month and the first regular savings contribution will be made later today. What is X? Round to 2 decimal places.arrow_forward
- Company P/S Multiples Facebook 13.67 Snap 18.76 Twitter 13.55arrow_forwardEnergy Resources generated an EPS of $4.38 over the last 12 months. The company's earnings are expected to grow by 30.7% next year, and because there will be no significant change in the number of shares outstanding, EPS should grow at about the same rate. You feel the stock should trade at a P/E of around 30 times earnings. Use the P/E approach to set a value on this stock. Using the P/E approach, the value on this stock is $ (Round to the nearest cent.)arrow_forwardThe Anderson Company has a net profits of $20 million, sales of $226 million, and 3.9 million shares of common stock outstanding. The company has total assets of $139 million and total stockholders' equity of $74 million. It pays $2.31 per share in common dividends, and the stock trades at $40 per share. Given this information, determine the following: a. Anderson's EPS. b. Anderson's book value per share and price-to-book-value ratio. c. The firm's P/E ratio. d. The company's net profit margin. e. The stock's dividend payout ratio and its dividend yield. f. The stock's PEG ratio, given that the company's earnings have been growing at an average annual rate of 8.2%. a. Anderson's EPS is $ (Round to the nearest cent.)arrow_forward
- Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $23,000, whereas the gas-powered truck will cost $17,100. The cost of capital that applies to both investments is 11%. The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,500 per year, and those for the gas-powered truck will be $4,750 per year. Annual net cash flows include depreciation expenses. Calculate the NPV and IRR for each type of truck, and decide which to recommend. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Electric-poweredforklift truck…arrow_forwardA project has an initial cost of $45,000, expected net cash inflows of $9,000 per year for 11 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardA project has an initial cost of $45,000, expected net cash inflows of $9,000 per year for 11 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forward
- image is blurr please comment i will write values then solve.Please don't solve i mistakely posted blurr image. i will give unhelpful if answer is incorrect..arrow_forwardimage is blurr please comment i will write values then solve.Please don't solve i mistakely posted blurr image. i will give unhelpful if answer is incorrect..arrow_forwardYou are thinking of inving in Tikki's Torches, Inc. You have only the following information on the at year-end 2008: Net income0.000 Total debt 12.2 million Debt ratio 42% What is Tikki's ROE for 2008? a. 1.79% b. 10.14% c. 3.09% d. 4.26%arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Foreign Exchange Risks; Author: Kaplan UK;https://www.youtube.com/watch?v=ne1dYl3WifM;License: Standard Youtube License