JRN Inc. is expected to have a high growth rate in the next 3 years so its dividends are expected to grow at 20% per year in the next 3 years. After that dividends are expected to grow at a stable 5% per year forever. Its most recent dividend was $3 per share and its equity cost of capital is 12%. What is the stock's intrinsic value per share?

Answers:

A) $65.70

B) $71.20

C) $56.30

D) $63.20

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of risky funds is as follows:

The correlation between the fund returns is 0.10.

What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

Monitor Muffler sells franchise arrangements throughout the United States and Canada. Under a franchise agreement, Monitor receives $750,000 in exchange for satisfying the following separate performance obligations: (1) franchisees have a five-year right to operate as a Monitor Muffler retail establishment in an exclusive sales territory, (2) franchisees receive initial training and certification as a Monitor Mechanic, and (3) franchisees receive a Monitor Muffler building and necessary equipment. The stand-alone selling price of the initial training and certification is $18,000, and $570,000 for the building and equipment. Monitor estimates the stand-alone selling price of the five-year right to operate as a Monitor Muffler establishment using the residual approach. Monitor received $90,000 on July 1, 2018, from Perkins and accepted a note receivable for the rest of the franchise price. Monitor will construct and equip Perkins’ building and train and certify Perkins by September 1, and Perkins’ five-year right to operate as a Monitor Muffler establishment will commence on September 1 as well. Required: 1. What amount would Monitor calculate as the stand-alone selling price of the five-year right to operate as a Monitor Muffler retail establishment? 2. What journal entry would Monitor record on July 1, 2018, to reflect the sale of a franchise to Dan Perkins? 3. How much revenue would Monitor recognize in the year ended December 31, 2018, with respect to its franchise arrangement with Perkins? (Ignore any interest on the note receivable.)

Consider a project with free cash flows in one year of ​$ 146,335 or ​$ 179,830 with each outcome being equally likely. The initial investment required for the project is ​$92,400​, and the​ project's cost of capital is 20%. The​ risk-free interest rate is 7%.

a. What is the NPV of this​ project?

b. Suppose that to raise the funds for the initial​ investment, the project is sold to investors as an​ all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this way long dash —that ​is, what is the initial market value of the unlevered​ equity?  

c. Suppose the initial ​$92,400 is instead raised by borrowing at the​ risk-free interest rate. What are the cash flows of the levered​ equity, what is its initial value and what is the initial equity according to​ MM?

You want to finance a car and Mango Bank offers you a 5% annual interest rate, and you have to pay $225 at the end of each month. Banana Bank offers you the same rate, but you have to pay $225 at the beginning of the month, in addition you have a final payment of $50. The period is five years (60 months) in both cases. What is the present value of either option, which option is better?

Pick a pure risk (except fire). Discuss how close to an ideally insurable risk is your choice. Make sure you mention each of the requirements for an ideally insurable risk.  

2. Discuss how adverse selection could impact the insurability of that risk.

3. Add a section on how insuring that risk is not gambling.

4. Conclude your paper.

You will be graded on your use of the vocabulary in this course and your content. So, use words found in your text in the paper for the strongest grade. Place the paper in this Dropbox

Bok Corp.'s ROE last year was only 5%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $561,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,258,000 on sales of $17,000,000, and it expects to have a total assets turnover ratio of 2.1. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company’s return on equity?

Many people believe the bond ratings agencies played a role in the financial meltdown and mortgage crisis that began around 2008. What do you think were some of the issues people had with the bond rating agencies and were those issues reasonable?

Will Jones, LLP is a small CPA firm that focuses primarily on preparing tax returns for small businesses. The company pays a $500 annual fee plus $10 per tax return for a license to use Mega Tax software.

(a) What is the company’s total annual cost for the Mega Tax software if 300 returns are filed? If 400 returns are filed? If 500 returns are filed?

Total cost for 300 returns:

Total cost for 400 returns:

Total cost for 500 returns:

(b) What is the company’s cost per return for the Mega Tax software if 300 returns are filed? If 400 returns are filed? If 500 returns are filed? (Round answers to 2 decimal places, e.g. 52.75.)

Cost per unit (300):

Cost per unit (400):

Cost per unit (500):