Jack Hammer invests in a stock that will pay dividends of $3.13 at the end of the first year; $3.56 at the end of the second year; and $3.99 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $63. What is the present value of all future benefits if a discount rate of 13 percent is applied? Use Appendix B for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

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Assume Highline Company has just paid an annual dividend of $0.96. Analysts are predicting an 11% per year growth rate in earnings over the next five years. After then, Highline’s earnings are expected to grow at the current industry average of 5.2% per year. If Highline’s equity cost of capital is 8.5% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell?

Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from Standard & Poor’s. However, due to recent financial difficulties at the company, Standard & Poor’s is warning that it may downgrade Andrew Industries bonds to BBB. Yields on A-rated, long-term bonds are currently 6.5%, and yields on BBB-rated bonds are 6.9%. a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? b. What will the price of the bond be if it is downgraded?

1. ABC Inc., and XYZ Inc., both have 7% coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1000. The ABC Inc., bond has 4 years to maturity, whereas the XYZ Inc., bond 25 years maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? If interest rates were to suddenly fall by 2% instead, what would the percentage change in the price of these bonds be then? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds

Abascus limited issued 15 year, 14% bonds five years ago. The bond which has a face value of Rs. 100 is currently selling for Rs. 108.

a. What is the pre tax cost of debt?

b. What is the after tax cost of debt.

1) The yield on a one-year Treasury security is 4.9200%, and the two-year Treasury security has a 6.6420% yield. Assuming that the pure expectations theory is correct, what is the market’s estimate of the one-year Treasury rate one year from now?

2) Recall that on a one-year Treasury security the yield is 4.9200% and 6.6420% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.35%. What is the market’s estimate of the one-year Treasury rate one year from now?

3) Suppose the yield on a two-year Treasury security is 4.0%, and the yield on a five-year Treasury security is 5.7%. Assuming that the pure expectations theory is correct, what is the market’s estimate of the three-year Treasury rate two years from now?

How does Costco compare to Sam's Club Financially? Which is doing better?

East side Corporation is expected to pay the following dividends over the next four years: $12, $8, $7, and $2.85. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 12 percent, what is the current price?

Compare and examine the similarities and differences between digital and branch banking.

Provide examples of 'Phygital' and evaluate how banks are implementing them.

2. You want to purchase a house: your maximum monthly payment is $1,600, and you also have a saving of $35,000 as the down payment. You apply for a 30-year fixed mortgage loan with APR 4.49%. What is the maximum house price you can afford to buy?

NEW PROJECT ANALYSIS

Q:

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $290,000, and it would cost another $72,500 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $130,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $14,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $45,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.

1. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign.
   $

2. What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.

   In Year 1 $

   In Year 2 $

   In Year 3 $

3. If the WACC is 11%, should the spectrometer be purchased?
   -Select- Yes or No

Consider the utility function U(W) = W^0.5 where W = wealth

a) Perform the necessary calculations to demonstrate the order of preference of an investor with this utility function. Order them from most preferred to least preferred.

-Prospect 1: 50% chance of $1000, 50% chance of $2000

-Prospect 2: 25% chance of $500, 25% chance of $2000, 50% chance of $1000

-Prospect 3: $1000 for certain.

b) Explain the meaning of the expression certainty equivalent. (That is, Provide the definition)

c) Calculate the certainty equivalent of prospect 1.