In: Finance
|
As discussed in the text, in the absence of market imperfections and tax effects, we would expect the share price to decline by the amount of the dividend payment when the stock goes ex dividend. Once we consider the role of taxes, however, this is not necessarily true. One model has been proposed that incorporates tax effects into determining the ex-dividend price:1 |
| (P0 – PX)/D = (1 – TP)/(1 – TG) |
|
where P0 is the price just before the stock goes ex, PX is the ex-dividend share price, Dis the amount of the dividend per share, TP is the relevant marginal personal tax rate on dividends, and TG is the effective marginal tax rate on capital gains. |
| b. |
If TP = 23 percent and TG = 0, how much will the share price fall? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Calculate Share Price _______ D
|
In: Finance
| Corporation's EPS last year is $2.51, and its P/E is expected to stay at 21. Annual earnings growth is expected to be6%. |
| Requirement 1: |
|
What is your estimate of the current stock price? Hint: just last year's EPS times P/E. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Stock price | $ |
| Requirement 2: |
|
What is the target stock price in one year? Hint: grow EPS for one period and multiply by P/E. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Stock price in one year | $ |
| Requirement 3: |
|
Assuming that the company pays no dividends, what is the implied return on the company's stock over the next year? Hint: with no dividends, this is just the growth rate in the stock price from the current price to next year's price. (Do not round intermediate calculations. Round your answer to 1 decimal place (e.g., 32.2).) |
| Implied return | % |
In: Finance
1. Discuss the key uses and the key abuses of financial statements and ratios. Provide a practical example.
2. Define the Dupont system, why is it important?
Please detailed brief answers 400 words at least for each question
In: Finance
Identify the different types of yield curves and explain what they indicate for the U.S economy? What is the current shape of the yield curve and why is it shaped that way?
In: Finance
There are six resources of cost advantage for firms. Identify three of these sources and provide examples for each
In: Finance
Is net present value (NPV) the best investment technique? Why? Do you agree with this assessment?
In: Finance
|
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,860,000 and will last for 6 years. Variable costs are 34 percent of sales, and fixed costs are $159,000 per year. Machine B costs $4,590,000 and will last for 9 years. Variable costs for this machine are 31 percent of sales and fixed costs are $110,000 per year. The sales for each machine will be $9.18 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis. |
|
If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A?
|
In: Finance
Problem 1-3 Calculating Returns (LO1, CFA1)
Suppose you bought 600 shares of stock at an initial price of $38 per share. The stock paid a dividend of $0.30 per share during the following year, and the share price at the end of the year was $33.
a. Compute your total dollar return on this investment. (A negative value should be indicated by a minus sign.)
b. What is the capital gains yield? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c. What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
d. What is the total rate of return on the investment? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
In: Finance
4. (Merger and acquisition): Energy-USA plans to acquire Energy-Brazil. It offers X million shares of Energy-USA for all of Energy-Brazil’s shares. The exchange rate is R$1.7200/$ around the acquisition. P/E ratio for energy brazil=20, for energy USA=30, # of Shares for energy Brazil=200million, for energy USA=250, (after-tax) Earnings Energy-Brazil R$172 million Energy-USA $200 million .
(a) Find the lower bound of X (4 decimal places) such that original Energy-Brazil shareholders would agree with the merger (assume the P/E ratio is 30 after the merger)? (b) Find the upper bound of X (4 decimal places) such that original Energy-USA shareholders would benefit from the merger (assume the P/E ratio is 30 after the merger)? (c) If the merger adds no extra value to both original firms, find P/E (after the merger), the value of X (4 decimal places), and the exchange ratio (4 decimal places) of the merger per Energy-Brazil share in this scenario. (d) If X=90, and P/E=30 after the merger, calculate the value ($million) of the synergies created by the merger and the stock return (%) of Energy-USA to the original Energy-USA shareholders.
In: Finance
Question: Based on the following transactions, complete this income statement:
Sales:
Operating Expense:
Depreciation Expense:
EBIT:
Intresrest Expense:
Pre-tax Income:
Taxes:
Net Income:
Dividened:
Paid to Retained Earning:
1. Earn $85,000 in sales revenue: $40,000 into Accounts Receivable and $45,000 in cash.
2. The sales require $50,000 worth of existing inventory. $20,000 of additional inventory is purchased on credit and applied to the Accounts Payable.
3. $30,000 is collected from Accounts Recievable.
4. $35,000 of the Accounts Payable is due this month and must be paid in cash.
5. The mortgage payment is $2,026.55 which includes the monthly interest of 12% APR
6. The plant is depreciated by $875 and the equipment is depreciated by $500
7. Salary, General, and Administrative expenses are $20,000 and are paid in cash.
8. The tax rate is 30% and is simply accumulated in the Taxes Payable Account and paid off at the end of the year, which is six months in advance.
In: Finance
Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $9, the market capitalization rate is 9% and next year’s EPS is $14. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
My guess was: $153.42 and this WAS NOT CORRECT
In: Finance
|
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.4 million. The fixed asset falls into the 3-year MACRS class (MACRS Table) and will have a market value of $344,400 after 3 years. The project requires an initial investment in net working capital of $492,000. The project is estimated to generate $3,936,000 in annual sales, with costs of $1,574,400. The tax rate is 22 percent and the required return on the project is 14 percent. |
|
What is the project's year 0 net cash flow? What is the project's year 1 net cash flow?
|
In: Finance
|
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $3.834 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $298,200. The project requires an initial investment in net working capital of $426,000. The project is estimated to generate $3,408,000 in annual sales, with costs of $1,363,200. The tax rate is 23 percent and the required return on the project is 13 percent. |
|
What is the project's Year 0 net cash flow?
|
In: Finance
| Year | NYSE | Stock X | ||
| 1 | - 26.5% | - 21.0% | ||
| 2 | 37.2 | 17.0 | ||
| 3 | 23.8 | 20.0 | ||
| 4 | - 7.2 | 4.0 | ||
| 5 | 6.6 | 9.2 | ||
| 6 | 20.5 | 19.7 | ||
| 7 | 30.6 | 17.0 | ||
A. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Round your answer to two decimal places.
b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Round your answers to two decimal places.
c. ssume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., , , and both σx and bx in the future will equal their past values). Also assume that Stock X is in equilibrium - that is, it plots on the Security Market Line. What is the risk-free rate? Round your answer to two decimal places.
In: Finance