Given the following list of items:

a. Classify the items as A, B, or C

b. Determine the economic order quantity for each item (round to the nearest whole unit)

Assume that today is December 31, 2016, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2017 is expected to be $650 million.
The depreciation expense for 2017 is expected to be $200 million.
The capital expenditures for 2017 are expected to be $275 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 4% per year.
The required return on equity is 16%.
The WACC is 10%.
The market value of the company's debt is $3 billion.
100 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today? Round your answer to the nearest cent. Write out your answer completely. For example, 0.00013 million should be entered as 130.

Corporate Financial Management:The Equity Markets

10. a. XYZ Plc is growing quickly. Dividends are expected to grow at a 30 per cent rate for the next three years, with the growth rate falling off to a constant 6 per cent thereafter. If the required return is 13 per cent and the company just paid a €1.80 dividend, what is the current share price?

2. XYZ Corp will pay a €4 dividend next year on its common stock, which is currently selling at €100 per share. What is the required rate of return on this investment if the dividend is expected to grow at 5% forever?

3. Sometimes, a supernormal growth pattern is observed in stock prices. How is the supernormal growth pattern likely to vary from the normal, constant growth pattern? What kind of firms tend to experience the supernormal growth pattern?

SHOW ALL STEPS, FORMULAS, AND EXPLANATIONS

Given the following list of items:

a. Classify the items as A, B, or C

b. Determine the economic order quantity for each item (round to the nearest whole unit)

The current capital structure of stewart-line corporation is as follows:

Bonds (7 %, $1000 par 15 years)                 $75,000

Preferred stock ($100 par, 7.25% dividend)          $1,000,000

Common stock:

Par value ($2.50 par)                       $500,000

Retained earnings                           $350,000 $850,000

Total $ 2,600,000

Other information about Stewart-line corporation:

The market price is $975 for the bonds, $60 for the preferred stock, and $21 for common stock. Flotation costs are 9% for bonds and 5% for preferred stock. The firm’s tax rate is 46%. Common stock will pay a $2.80 dividend which is not expected to grow.

a. Calculate the weighted cost of capital using only internal common equity

b. Why do we need to determine the firm’s overall weighted cost of capital and not just the individual component cost of capital?

After reading this​ chapter, it​ isn't surprising that​ you're becoming an investment wizard. With your newfound expertise you purchase 100 shares of KSU Corporation for $43.53 per share. Over the next 12 months assume the price goes up to $54.93 per​ share, and you receive a qualified dividend of $0.45 per share. What would be your total return on your KSU Corporation​ investment? Assuming you continue to hold the​ stock, calculate your​ after-tax return. How is your realized​ after-tax return different if you sell the stock? In both cases assume you are in the 25 percent federal marginal tax bracket and 15 percent​ long-term capital gains and qualified dividends tax bracket and there is no state income tax on investment income.

Consider a project to supply 100 million postage stamps per year to the USPS for the next five years. To pursue the project, you will need to install $4.1 million in new manufacturing plant and equipment. This will be depreciated straight-line to zero over the project’s five years. The equipment can be sold for $540,000 at the end of the project. You will also need $600,000 in initial net working capital for the project and an additional investment of $50,000 in every year thereafter. All net working capital will be recouped at the end of the project. Your production costs are $.005 per stamp and you have fixed costs of $950,000 per year. If your tax rate is 34% and your required return is 12%, what bid price should you submit on the contract.

Portfolio Beta and Required Return You hold the positions in the table below. A) What is the beta of your portfolio? B) If you expect the market to earn 14 percent and the risk-free rate is 3.0 percent, what is the required return of the portfolio?

Company                             Price                                      Shares                                   Beta

Texas, Inc.                           $30.00                                  200                                        2.8

Dollar Earned Stores       $20.00                                  600                                        2.2

Atomic, Inc.                        $70.00                                  400                                        1.4

Big Truck Corp                   $40.00                                  100                                        -0.6

This problem can be solved two different and equivalent ways. Both ways require the weights of the stocks in the portfolio. In one method, compute the required return for each stock and then use the weights to form the portfolio required return.

The other method uses the weights to compute the portfolio beta. This portfolio beta is used to compute the portfolio required return.

Data concerning Ulwelling Corporation's single product appear below:

Fixed expenses are $1,054,000 per month. The company is currently selling 9,800 units per month.

The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $8 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $100,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 500 units.

Required:

What should be the overall effect on the company's monthly net operating income of this change? (Negative amount should be indicated by a minus sign.)