Suppose a stock will pay $12 per share dividend in one year's time. The dividend is projected to grow at 8% the following year, and then 4% per year indefinitely after that.
To clarify, dividend at beginning of year 1 (that is, one year from today) is:
$12
Beginning of year 2 (2 years from today) is:
$12 * 1.08
Beginning of year 3 (3 years from today) is:
$12 * 1.08 * 1.04
and a 4% rate of growth every year after that.
The required return is 8%. What is the stock’s price today?
In: Finance
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)
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Year 6 |
Year 7 |
|
$1.20 |
$1.31 |
$1.43 |
$1.56 |
$1.70 |
$1.85 |
$2.02 |
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%
In: Finance
In: Finance
Problem D. Take 3 semi-annual coupon paying bonds with face values of $100. They carry D1 percent, D2 percent and D3 percent coupons, mature in ½ year, 1 year, and 1 ½ year, with current market prices of D4, D5, and D6, respectively. Find the “crude” (which does not use regression) term structure of discount factor, spot interest rate and forward interest rate. Assume semi-annual compounding and write your answers for:
23. Half-year discount factor.
24. One-year discount factor.
25. One and half-year discount factor.
26. Half-year spot rate.
27. One-year spot rate.
28. One and half-year spot rate.
29. Forward rate for period (0.5 – 1.0) year.
30. Forward rate for period (1.0 – 1.5) year.
31. What is the current fair price of a 1.5 year bond with face
value 100, carrying an annual coupon of 10 percent, paid two times
per year?
32. What is the current fair price of a 1 year zero coupon bond
with face value 100?
33. What is the current fair price of a 6-month strip with face
value 100?
D1 = 11
D2 =14
D3 = 9
D4 = 103
D5 = 107
D6 = 107
Please show work.
In: Finance
Profitability Ratios
East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands).
Fiscal Year 3Fiscal Year 2
Net income$150,000 $77,300
Interest expense3,100 11,500
Fiscal Year 3Fiscal Year 2Fiscal Year 1
Total assets (at end of fiscal year)$2,120,642 $2,017,196 $1,761,528
Total stockholders' equity (at end of fiscal year)1,089,928 1,068,346 794,304
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders’ equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round to one decimal place.
Fiscal Year 3 %
Fiscal Year 2 %
b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round to one decimal place.
Fiscal Year 3 %
Fiscal Year 2 %
c. The return on stockholders' equity is the return on total assets due to the use of leverage.
d. During fiscal Year 3, East Point’s results were compared to the industry average. The return on total assets for East Point was than the industry average. The return on stockholders’ equity was than the industry average. These relationships suggest that East Point has leverage than the industry, on average.
In: Accounting
In: Statistics and Probability
A regional electrical distributor currently has 1,000 customers who buy an average of $5,000 per year, generating a 50% margin. From experience, the company knows that 20% of its customers will not return the next year and it takes an average of $500 to acquire each new customer.
Given a choice of 1) investing $50,000 in a new customer acquisition program for 100 additional customers or 2) investing $50,000 in a new retention program which would take the rate of retention from 80% to 85%, what should the company do? complete the Excel template for both scenarios (customer acquisition and customer retention) to show which option is the most profitable. Assume the new programs are in effect and you are calculating the impact for both beginning Year 1. Also, do not account for the cost of the programs since it doesn't impact the overall conclusion.
| Five Year Payout | ||||||
| Scenario 1: New Customer Acquisition | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Incremental Customers: | 100 | |||||
| Purchases: | ||||||
| Additional Annual Profits: | ||||||
| Cumulative Additional Annual Profits: | ||||||
| Scenario 2: Customer Retention | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Retained Customers @ 80%: | 800 | |||||
| Retained Customers @ 85%: | 850 | |||||
| Additional Retained Customers: | ||||||
| Incremental Annual Purchases: | ||||||
| Additional Annual Profits: | ||||||
| Cumulative Additional Annual Profits: | ||||||
| Conclusion: |
In: Accounting
Project cash flow and NPV. The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of $4 comma 200 comma 000 and will be depreciated using a five-year MACRS life, The sales manager has an estimate for the sale of the classic Thunderbirds. The annual sales volume will be as follows:
Year one: 250 Year four: 370 Year two: 270 Year five: 300 Year three: 350
If the sales price is $30 comma 000 per car, variable costs are $20 comma 000 per car, and fixed costs are $1 comma 300 comma 000 annually, what is the annual operating cash flow if the tax rate is 30%? The equipment is sold for salvage for $500 comma 000 at the end of year five. Net working capital increases by $600 comma 000 at the beginning of the project (year 0) and is reduced back to its original level in the final year. Find the internal rate of return for the project using the incremental cash flows.
First, what is the annual operating cash flow of the project for each year from year 1 to year 5 ?
?Next, what is the? after-tax cash flow of the equipment at? disposal?
?Then, what is the incremental cash flow of the project in each fom year? 0 to year 5 ?
?So, what is the IRR of the? project?
In: Finance
The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $725,000. If the gradient increase each year, G, is $1750, determine the cash flow in year 1 at an interest rate of 8% per year.
The cash flow in year 1 is $______
In: Finance
Submit a written paper which is 3-4 pages in length (no more than 4-pages), exclusive of the reference page. Your paper should be double spaced in Times New Roman (or its equivalent) font, which is no greater than 12 points in size. The paper should cite at least three sources in APA format. One source can be your textbook.
Please describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.
Case Study:
A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:
Option 1
Revenues are estimated to be:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 |
|---|---|---|---|---|---|---|
| - | 75,000 | 100,000 | 125,000 | 150,000 | 150,000 | 150,000 |
Option 2
Revenues are estimated to be:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 |
|---|---|---|---|---|---|---|
| - | 80,000 | 95,000 | 130,000 | 140,000 | 150,000 | 160,000 |
The company’s required rate of return and cost of capital is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.
For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.
Superior papers will:
In: Accounting