Google has cash flows of $29.10, $36.93, and $45.03 billion for the next three years. After that Google’s cash flows is $47.51 billion and its cash flow will grow at 5.5% forever. The cost of capital is 10.20%. Google has 700 million shares outstanding. What is the price of Google stock today?

Consider the following data concerning four corporate bonds, all of which have a face value of $1,000 and have semiannual compounding:

Bond 1 2 3 4

YTM 8.0% 7.5% 8.5% 8.5%

Coupon Rate 8.0% 7.0% 9.0% 9.0%

Years until Maturity 5 10 10    20

Which of these bonds is currently priced at a discount?

E3.8. Pricing Multiples: General Mills, Inc. (Medium)
General Mills, the consumer foods company, traded at 1.6 times sales in 2011. It was
reporting a net profit margin on its sales of 10.4 percent. What was its P/E ratio?
E3.9. Measuring Value Added (Medium)
a. Buying a stock. A firm is expected to pay an annual dividend of $2 per share forever.
Investors require a return of 12 percent per year to compensate for the risk of not
receiving the expected dividends. The firm's shares trade for $19 each. What is the
value added by buying a share at $19?
b. An investment within a firm. The general manager of a soccer club is considering pay-
ing $2.5 million per year for five years for a "star" player, along with a $2 million up-
front signing bonus. He expects the player to enhance gate receipts and television
advertising revenues by $3.5 million per year with no added costs. The club requires a
9 percent return on its investments. What would be the value added from the acquisi-
tion of the player?

how do you check if there is a market for your product

Fey Fashions expects the following dividend pattern over the next seven​ years. The company will then have a constant dividend of ​$2.30 forever. What is the​ stock's price today if an investor wants to earn (table)

a)  What is the​ stock's price today if an investor wants to earn 14%

b)  What is the​ stock's price today if an investor wants to earn 22%

Assume that Camilles Jewelry Corp. recently paid an annual dividend of $2.00 per share (or D0) on its common stock. Because of exceptionally positive operating results, the firm expects dividends to grow at a supernormal growth rate of 20% (or Gs) over the next three years. After the end of the three year supernormal growth period, dividend growth is expected to return to the firms normal rate of 6% (or Gn). The investors required return for Camilles Jewelry Corp. common stock is 12% (or Ke). Using the two-stage growth model solve for the firm's current stock price (or P0)

Show all your work.

Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $10 million would have a cost of re = 14%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd = 9% and an additional $4 million of debt at rd = 10%. The CFO estimates that a proposed expansion would require an investment of $8.5 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

E.

You deposit $7,000 in an account in 4 years from today earning 5% APR. After 12 years from today, you

make another deposit into the same account.

Twenty-five years from today, the account balance is

$38,952.18. Assuming

quarterly

compounding, what was the amount of the deposit at the end of year 12? (8

points)

F.

You bought a house for 200,000. The bank required a 25% down payment and gave you a 30-year mortgage

loan for the remainder. Assume an annual interest rate of 5% and a monthly repayment schedule (9 points).

a.

What is the amount of the mortgage?

b.

What is your monthly payment?

c.

After 19 years of payments, how much do you still owe?

G.

You bought an expensive TV last year for $900 and charged it to your credit card that charged 22% APR. You

will be diligent in sending monthly payments in an amount that would retire the card balance in exactly 5

years. After 3 years of payments, you plan to refinance the then remaining balance to a new card that

charges an APR of 12%. After that 3 years, you can afford a higher monthly payment of $40. (9 points)

a.

What is the amount of the initial monthly payments?

b.

What is the balance that will get transferred to the new card after 3 years?

c.

How many months will it take to pay off the credit card balance with the

new $40 payment assuming no other purchases?

The treasurer of a Dutch company operating in Thailand considers a one-year bank loan of $350,000 (US) with an interest rate of 8.885% (dollar based). The current spot rate is B42.84/$ and a local loan in Thai Baht (B) would carry a rate of 14%. Expected inflation rates are 4.5% and 2.2% in Thailand and the United States, respectively, for the coming year. If Thailand devalues the baht by 5%, what is the effective cost of funds in Thai baht terms?

8.30%

9.00%

11.50%

12.50%

With $2,000,000 to invest, a spot rate of 71.635kr/$, a three-month forward rate of 72.9127kr/$, an expected spot of 70kr/$, a US$ three-month interest rate of 4.80%, and an Icelandic krona three-month interest rate of 12.020%, using uncovered interest arbitrage, can a position yield a return in excess of 4%?

No, it is not possible.

Yes, the yield is 4.21%

Yes, the yield is 4.80%

Yes, the yield is 5.41%

Explain the difference between a parallel and non-parallel shift in interest rates. Then explain whether the duration matching hedging approach works for both a non-parallel and parallel shift interest rates.