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- "All growth models. You are evaluating the potential purchase of a small company that currently generates $42,500 in cash flow after taxes (D0 = $42,500). Based on a review of similar risk investment opportunities, you should earn a return rate of 18% from the proposed purchase. Since you're not very sure about future cash flows, you decide to calculate the value of the company assuming some possibilities for the cash flow growth rate. a) What is the value of the company if cash flows are expected to grow at an annual rate of 0% from now on? b) What is the value of the company if cash flows are expected to grow at a constant annual rate of 7% from now on? c) What is the value of the company if cash flows are expected to grow at an annual rate of 12% for the first 2 years and then, starting from year 3, the growth rate decreases to a constant annual rate of 7%?"A share of stock in Enbridge Inc. pays an annual dividend of $3.34, and the dividend is expected to grow at 2%, on average, in the foreseeable future. The current market price is $44.58/share. Below are the three individuals based on risk perception by each individual (from low to high). Identify who will likely be a buyer or a seller of this stock. (Each individual currently owns 100 shares.) Individual X has a discount rate of 5% Individual Y has a discount rate of 8% Individual Z has a discount rate of 11%Management of AG Travel and Tour has identified two groups of individuals thatwould be interested in the vacation package consisting of room and board and/orentertainment. The maximum amount that group 1 is willing to pay for room andboard is GHC 2500 and for entertainment is GHC 500. For group 2, the maximumamount they are willing to pay for room and board is GHC 1800 and forentertainment is GHC 750. Although AG Travel and Tour is not able to identifymembers of either group, it does know that each group values the components ofthe package differently. Assuming there are an equal number of members in eachgroup and that the total membership in each group is a single individual. If themarginal cost of providing the service (room and board and/or entertainment) toeach group is GHC 1000. How much will the profit for AG Travel and Tour be?
- Management of AG Travel and Tour has identified two groups of individuals thatwould be interested in the vacation package consisting of room and board and/orentertainment. The maximum amount that group 1 is willing to pay for room andboard is GHC 2500 and for entertainment is GHC 500. For group 2, the maximumamount they are willing to pay for room and board is GHC 1800 and forentertainment is GHC 750. Although AG Travel and Tour is not able to identifymembers of either group, it does know that each group values the components ofthe package differently. Assuming there are an equal number of members in eachgroup and that the total membership in each group is a single individual. If themarginal cost of providing the service (room and board and/or entertainment) toeach group is GHC 1000. Since AG Travel and Tour is not able to identify members of each group,what price should it charge for each product?Management of AG Travel and Tour has identified two groups of individuals thatwould be interested in the vacation package consisting of room and board and/orentertainment. The maximum amount that group 1 is willing to pay for room andboard is GHC 2500 and for entertainment is GHC 500. For group 2, the maximumamount they are willing to pay for room and board is GHC 1800 and forentertainment is GHC 750. Although AG Travel and Tour is not able to identifymembers of either group, it does know that each group values the components ofthe package differently. Assuming there are an equal number of members in eachgroup and that the total membership in each group is a single individual. If themarginal cost of providing the service (room and board and/or entertainment) toeach group is GHC 1000. If AG Travel and Tour wants to charge a package price, what is the highestprice it can charge?An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds. How much should be invested in each type of bond to maximize the return? What is the maximum return? Define the variables needed to solve this problem. Organize your given information. (This part NOT graded, but encouraged.) Write the complete linear programming problem, which includes the objective function and all constraints. Graph and make sure all lines are labeled and shaded/solution region is clear and easy to identify. Create a corner point chart. Remember to mark your solution. Answer in a complete sentence or two: How much should be invested in each type of bond to maximize the return? What is the maximum return?
- What is the current price of Tummy Ache stock if it is expected to pay a dividend of $1.26 every quarter forever, the stock's expected return is 11.63% per year, and the next dividend is expected in 3 months? $43.34 (plus or minus 10 cents) $130.01 (plus or minus 10 cents) $10.83 (plus or minus 10 cents) $38.82 (plus or minus 10 cents) the answer cannot be obtained based on the given informationThis is not a writing assignment, this is a multiple-choice question Which of the below statements regarding financial investments decisions is likely to be INCORRECT? Group of answer choices When purchasing stocks, it is best to look at a variety of factors such as the overall financial condition of the business, how much debt it has, revenue inflows, projected markets, and the quality of management. In the case of financial investments, it is wise to diversify one's portfolio. Although the return is generally proportional to risk, in long-run investments the volatility (risk) smooths out (becomes less risky). When purchasing stocks, all else being the same, usually, it is better to purchase a stock with a very high price/earnings (or P/E) ratio than one with a lower P/E ratio.All else being equal, the expected cash flows of companies are considered less valuable when yields are higher. This could threaten many tech stocks because much of their earnings are expected to come further in the future. True or false.
- Which one of the following assumptions of CAPM is rarely made explicit? a)Investorshaverationalexpectations. b)Investors have identical beliefs about the assets’ characteristics. c)Investor are price takers. d. Investors have one-period investment horizons.Eastman Publishing Company is considering publishing a paperback textbook on spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design,and production setup is estimated to be $160,000. Variable production and material costsare estimated to be $6 per book. The publisher plans to sell the text to college and universitybookstores for $46 each.1. What is the breakeven point? 2. What profit or loss can be anticipated with a demand of 3800 copies? 3. With a demand of 3800 copies, what is the minimum price per copy that the publisher must charge to break even? 4. If the publisher believes that the price per copy could be increased to $50.95 and not affect the anticipated demand of 3800 copies, what action would you recommend?What profit or loss can be anticipated?Why is the residual model more often used to establish a longrun payout target than to set the actual year-by-year dividendpayout ratio?