Question
In: Finance
Mark’s Awesome Company needs to set its investment and divided policies for the upcoming year. They...
Mark’s Awesome Company needs to set its investment and divided policies for the upcoming year. They have three independent projects from which to choose, each of which will require an initial investment of $4 million. Each project has a different cost of capital and IRR due to having different levels of risk. Project Cost of Capital IRR A 10% 15% B 12% 18% C 9% 8% Mark’s Awesome Company wants to maintain their current capital structure of 40% debt and 60% equity. Net income is expected to be $7,000,000. If Mark’s Awesome Company continues its policy of all distributions coming in the form of dividends, what will its payout ratio be?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Harris Company must set its investment and dividend policies for the coming year. It has three...
Harris Company must set its investment and dividend
policies for the coming year. It has three independent projects
from which to choose, each of which requires a $ 3 million
investment. These projects have different levels of risk, and
therefore different costs of capital. Their projected IRRs and
costs of capital are as follows:
Project A: Cost of
capital = 17%; IRR = 20%
Project B: Cost of
capital = 13%; IRR = 10%
Project C: Cost of
capital =...
The return on an investment is the gain (or loss) on the investment divided by its...
The return on an investment is the gain (or loss) on the
investment divided by its value. For example, if you buy a share of
stock for $100 and the price of the stock increases to $110, your
return on the stock is:
Return = (110 – 100) / 100 = 0.10, or 10%
In addition to the return on an individual stock, you can
calculate the return on a portfolio (group) of stocks. The return
on a portfolio of...
Problem 14-09 Residual Distribution Policy Harris Company must set its investment and dividend policies for the...
Problem 14-09 Residual Distribution Policy Harris Company must
set its investment and dividend policies for the coming year. It
has three independent projects from which to choose, each of which
requires a $3 million investment. These projects have different
levels of risk, and therefore different costs of capital. Their
projected IRRs and costs of capital are as follows:
Project A: Cost of capital = 16%; IRR = 17% Project B: Cost of
capital = 14%; IRR = 15%
Project C:...
Company DEF needs advice regarding its investment decisions. Investment alternative A which the company is currently...
Company DEF needs advice regarding its investment decisions.
Investment alternative A which the company is currently evaluating
is a new machine with an initial outlay of $2,000,000, economic
life of 4 years and no residual value. The machine will be related
to an incremental annual revenue of $1,000,000 and incremental
annual costs of $320,000. The machine will be depreciated on a
straight-line basis.
Some time ago, DEF has issued bonds with total face value of
$18,000,000 which pay annual coupons...
Company DEF needs advice regarding its investment decisions. Investment alternative A which the company is currently...
Company DEF needs advice regarding its investment decisions.
Investment alternative A which the company is currently evaluating
is a new machine with an initial outlay of $2,000,000, economic
life of 4 years and no residual value. The machine will be related
to an incremental annual revenue of $1,000,000 and incremental
annual costs of $320,000. The machine will be depreciated on a
straight-line basis.
Some time ago, DEF has issued bonds with total face value of
$18,000,000 which pay annual coupons...
Mark’s Consulting experienced the following transactions for 2018, its first year of operations, and 2019. Assume...
Mark’s Consulting experienced the following transactions for
2018, its first year of operations, and 2019. Assume that all
transactions involve the receipt or payment of cash.
Transactions for 2018
Acquired $75,000 by issuing common stock.
Received $110,000 cash for providing services to customers.
Borrowed $18,000 cash from creditors.
Paid expenses amounting to $55,000.
Purchased land for $35,000 cash.
Transactions for 2019
Beginning account balances for 2019 are:
Cash
$
113,000
Land
35,000
Notes payable
18,000
Common stock
75,000
Retained earnings...
Mark’s Consulting experienced the following transactions for 2018, its first year of operations, and 2019. Assume...
Mark’s Consulting experienced the following transactions for
2018, its first year of operations, and 2019. Assume that all
transactions involve the receipt or payment of cash. Transactions
for 2018 Acquired $75,000 by issuing common stock. Received
$125,000 cash for providing services to customers. Borrowed $20,000
cash from creditors. Paid expenses amounting to $55,000. Purchased
land for $30,000 cash. Transactions for 2019 Beginning account
balances for 2019 are: Cash $ 135,000 Land 30,000 Notes payable
20,000 Common stock 75,000 Retained earnings...
consolidated company needs to raise capital. its investment banker suggest that 20-year zero coupon bonds could...
consolidated company needs to raise capital. its investment banker
suggest that 20-year zero coupon bonds could be sold at a yield to
maturity of 8%. what is the market value of each zero coupon bond
using the semi-annual formula?
a. $208.29
b. $224.54
c. $204.69
d. $218.52
jon has just issued a 20 year, 10% coupon rate, $1,000 par
bond that pays interest semi-annually. the required return is
currently 8 percent and the company is certain that it will remain...
A) While attempting to measure its risk exposure for the upcoming year, an insurance company notices...
A)
While attempting to measure its risk exposure for the upcoming
year, an insurance company notices a trend between the age of a
customer and the number of claims per year. It appears that the
number of claims keep going up as customers age. After performing a
regression, they find that the relationship is (claims per year) =
0.1*(age) + 5.01. If a customer is 50 years old and they make an
average of 9.49 claims per year, what is...
While attempting to measure its risk exposure for the upcoming year, an insurance company notices a...
While attempting to measure its risk exposure for the upcoming
year, an insurance company notices a trend between the age of a
customer and the number of claims per year. It appears that the
number of claims keep going up as customers age. After performing a
regression, they find that the relationship is (claims per year) =
0.245*(age) + 8.873. If a customer is 45 years old, how many claims
would you expect them to make in a given year?...
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