Practical Management Science, Loose-leaf Version
5th Edition
ISBN: 9781305631540
Author: WINSTON, Wayne L.; Albright, S. Christian
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 6.3, Problem 2P
Summary Introduction
To determine: The investment that the company should select using the input data.
Introduction: The variation between the present value of the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose we have a stock with the following information:
Dividend Next year:
$
5.00
Dividend growth rate:
6.00%
Required return:
15.00%
With this growth rate, the dividend next year will be:
So, the stock price today with the constant dividend growth model is:
Stock price today:
The constant dividend growth equation is the present value of a growing perpetuity, but we should cautio
same information from above, we can calculate the stock price for various growth rates.
g
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
Stock price
I need help with everything, please.
hint: you will need to define one variable for total funds needed; one variable for each for 2 securities.
and five variables for investment in savings at the beginning of each year. The 6th year will be 1.04 times the
5th-year saving variable. Formulate the problem and submit the formulation - no need to solve
1. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars):
Year Payment
1 190
2 215
3 240
4 285
5 315
6 460
The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street…
The Free Cash Flow model has the following advantage over the Dividend Growth model:
In the case of variable growth, it does not require the calculation of any horizon value.
It can be applied even if growth rates are unknown.
It can be applied to companies with variable growth in the initial years that eventually settle down to a
fixed rate of growth for the long term.
It can be applied to divisions of companies.
O It does not require any forecasting.
Chapter 6 Solutions
Practical Management Science, Loose-leaf Version
Ch. 6.3 - Prob. 1PCh. 6.3 - Prob. 2PCh. 6.3 - Solve Problem 1 with the extra assumption that the...Ch. 6.3 - Prob. 4PCh. 6.3 - Prob. 5PCh. 6.3 - Prob. 6PCh. 6.3 - Prob. 7PCh. 6.3 - Prob. 8PCh. 6.3 - Prob. 9PCh. 6.3 - Prob. 10P
Ch. 6.4 - Prob. 11PCh. 6.4 - Prob. 12PCh. 6.4 - Prob. 13PCh. 6.4 - Prob. 14PCh. 6.4 - Prob. 15PCh. 6.4 - Prob. 16PCh. 6.4 - Prob. 17PCh. 6.4 - Prob. 18PCh. 6.4 - Prob. 19PCh. 6.4 - Prob. 20PCh. 6.4 - Prob. 21PCh. 6.4 - Prob. 22PCh. 6.4 - Prob. 23PCh. 6.5 - Prob. 24PCh. 6.5 - Prob. 25PCh. 6.5 - Prob. 26PCh. 6.5 - Prob. 28PCh. 6.5 - Prob. 29PCh. 6.5 - Prob. 30PCh. 6.5 - In the optimal solution to the Green Grass...Ch. 6.5 - Prob. 32PCh. 6.5 - Prob. 33PCh. 6.5 - Prob. 34PCh. 6.5 - Prob. 35PCh. 6.6 - Prob. 36PCh. 6.6 - Prob. 37PCh. 6.6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Prob. 67PCh. 6 - Prob. 68PCh. 6 - Prob. 69PCh. 6 - Prob. 70PCh. 6 - Prob. 71PCh. 6 - Prob. 72PCh. 6 - Prob. 73PCh. 6 - Prob. 74PCh. 6 - Prob. 75PCh. 6 - Prob. 76PCh. 6 - Prob. 77PCh. 6 - Prob. 78PCh. 6 - Prob. 79PCh. 6 - Prob. 80PCh. 6 - Prob. 81PCh. 6 - Prob. 82PCh. 6 - Prob. 83PCh. 6 - Prob. 84PCh. 6 - Prob. 85PCh. 6 - Prob. 86PCh. 6 - Prob. 87PCh. 6 - Prob. 88PCh. 6 - Prob. 89PCh. 6 - Prob. 90PCh. 6 - Prob. 91PCh. 6 - Prob. 92PCh. 6 - This problem is based on Motorolas online method...Ch. 6 - Prob. 94PCh. 6 - Prob. 95PCh. 6 - Prob. 96PCh. 6 - Prob. 97PCh. 6 - Prob. 98PCh. 6 - Prob. 99PCh. 6 - Prob. 100PCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3.1CCh. 6 - Prob. 3.2CCh. 6 - Prob. 3.3CCh. 6 - Prob. 3.4CCh. 6 - Prob. 3.5CCh. 6 - Prob. 3.6C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Mr. Johnnie B. Good has a furniture business which he operates as a sole proprietor. The business has been doing well for several years and now he wants to finance the expansion of his business by way of a loan and he is thinking of approaching BCN Bank accordingly. He is also planning to buy a great deal of raw material on credit from Miller’s Hardware in support of the business expansion. Mr. Good in looking at the potential risks to his personal assets and in an effort to safeguard himself from losing his personal assets if the business failed and was not able to repay the loan or pay for the material he got on credit, filed the relevant documents with the companies office and incorporated a private company, Good Furniture Ltd, with him as the sole shareholder and director and then went ahead and obtained a loan in the company’s name from the bank and bought the raw material on credit on behalf of the company. The bank in providing the loan ensured that Mr. Good signed a personal…arrow_forwardIn Macroland there is $8,000,000 in currency. The public holds 60% of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal and the money supply equals _.\a. $38,400,000; $41,600,000 b. $41,600,000; $ 41,600,000 c. $38,400,000; $ 46,400,000 d. $64,000,000; $ 64,000,000arrow_forwardWhere a financial institution makes a loan commitment, the borrower, in drawing down on their loan commitment, causes increased cash flow needs by the DI to fund the loan commitments. There are three ways a DI can offset the effect of Asset-side liquidity risk such as drawing down of a loan commitment in all of the following sitiuations Except: a. Reduce excess cash reserves to minimum levels required to meet reserve requirements based on the decision made by management independant of regulatory requirements. b. Reduce balance sheet items such as retain earnings to the meet the minimum required capital levels. c. Taking offsetting measures such as borrowing funds or even purchasing funds on the money market. d. Reducing liquid type assets on their balance sheet such at T-bills by selling them.arrow_forward
- Your job pays you only once a year for all the work you didover the previous 12 months. Today, December 31, you just received your salaryof $65,000, and you plan to spend all of it. However, you want to start saving forretirement beginning next year. You have decided that one year from today youwill begin depositing 5 percent of your annual salary in an account that will earn10 percent per year. Your salary will increase at 4 percent per year throughout yourcareer. How much money will you have on the date of your retirement 40 years fromtoday?arrow_forwardOxicon Inc. manufactures several different types of candy for various retail stores. The accountingmanager has requested that you determine the sales dollars required to break even for next quarter based on past financial data. Your research tells you that the total variable costs will be $500,000,total sales will be $750,000, and fixed costs will be $75,000. What is the breakeven point in salesdollars?arrow_forwardA bond has a face value of $1,000, an annual coupon rate of 3.70%, an yield to maturity of 7.4%, makes 2 (semi-annual) coupon payments per year, and 6 periods to maturity (or 3 years to maturity). Determine the duration of this bond. Notice that there is a function “Duration” in Excel, but you probably would like to check your answer with an analytical solution based on the specific duration formula. Note: This is an excel based assignment so please work it out on excel highlighting the formulas. thank youarrow_forward
- Suppose you begin year 1 with 5000. At the beginning of each year, you put half of your money under a mattress and invest the other half in Whitewater stock. During each year, there is a 40% chance that the Whitewater stock will double, and there is a 60% chance that you will lose half of your investment. To illustrate, if the stock doubles during the first year, you will have 3750 under the mattress and 3750 invested in Whitewater during year 2. You want to estimate your annual return over a 30-year period. If you end with F dollars, your annual return is (F/5000)1/30 1. For example, if you end with 100,000, your annual return is 201/30 1 = 0.105, or 10.5%. Run 1000 replications of an appropriate simulation. Based on the results, you can be 95% certain that your annual return will be between which two values?arrow_forwardIn the cash balance model from Example 11.5, the timing is such that some receipts are delayed by one or two months, and the payments for materials and labor must be made a month in advance. Change the model so that all receipts are received immediately, and payments made this month for materials and labor are 80% of sales this month (not next month). The period of interest is again January through June. Rerun the simulation, and comment on any differences between your outputs and those from the example.arrow_forwardThe accompanying table shows a bookstore's estimated demand for a new calendar. The bookstore needs to decide whether to order100, 200, or 300 calendars for the start of the year. Each calendar costs the store$5 to purchase and can be sold for $13. The store can sell any unsold calendars back to its supplier for $3 each. Determine the number of calendars the bookstore should order to maximize its expected monetary value. Demand Probability 100 0.35 200 0.25 300 0.40 The bookstore should order---------calendars in order to have the maximum expected monetary value of $----- (Type a whole number.)arrow_forward
- Consider a project with the following cash flows: year 1, 2$400; year 2, $200; year 3, $600; year 4, 2$900; year 5, $1000; year 6, $250; year 7, $230. Assume a discount rate of 15% per year.a. Find the project’s NPV if cash flows occur at the ends of the respective years.b. Find the project’s NPV if cash flows occur at the beginnings of the respective years.c. Find the project’s NPV if cash flows occur at the middles of the respective years.arrow_forwardPls help ASAP for botharrow_forwardAs with any financial instrument, the price of a bond is just the present value of the future cash flows. What is the price of a bond with semiannual coupon payments and the following characteristics? Coupon rate: Years to maturity: Yield to maturity: Par value: $ 6.00% 15 8.00% 1,000 Since the bond has semiannual payments, the coupon payments will be: Coupon payments: Now we can find the present value of the coupon payments, the present value of par, and the bond price, which are: Present value of coupon payments: Present value of par: Bond price: Of course, we could have entered the coupon payments and par value in the same PV function, making sure that both were negative. This would give us: Bond price: Practice 7.2 Find Bond Valuation Using the Price Function What is the price of a bond with the following characteristics? Years to maturity 5 Settlement date: 1/1/2000 Maturity date: 1/1/2005 Annual coupon rate: 9.00% Yield to maturity: 7.50% Face value (% of par): 100 Coupons per…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,