You own 1,000 shares of stock in Avondale Corp. You will receive a $.80 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $45 per share. The required return on Avondale stock is 10 percent. a. What is the current share price of your stock (ignoring taxes)?  b. If you would rather have equal dividends in each of the next two years by creating homemade dividends, what would be the cash flow for Year 1 and Year 2?

Q: You are the financial analyst for a tennis racquet manufacturer. The company is considering using a…

A: The net present value is the difference between the future cash flows and the initial investment.

Q: Nachman Industries just paid a dividend of Do = $1.50. Analysts expect the company's dividend to…

A: The dividend discount model (DDM), a mathematical technique for determining a company's share price,…

Q: You have received price quotations for the new photoreactor to be implemented to the production…

A: EUAC is the unifrom equivalent annual cost in which all cost are included in that including cost of…

Q: A loan is offered with monthly payments and a 9.75 percent APR. What's the loan's effective annual…

A: APR = 0.0975n = Number of compounding 12 (i.e. monthly compounding)EAR = ?EAR is annual rate after…

Q: Suppose the quoted futures price for delivery in 1 year is $7.10. The current underlying price is $7…

A: The objective of the question is to identify the correct arbitrage strategy to make a riskless…

Q: Consider the following two projects with cash flows in $: Project A B Year 0 Cash Flow Year 1 Cash…

A:

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A: Mortgages are loans taken upon pledging certain assets. Different mortgages may have different…

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A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: If the cash flows of one project are adversely impacted by the acceptance of another project, then…

A: Two projects are said to be mutually exclusive when the acceptance of cash flows from one of them…

Q: Oriole Corp. issues bonds with a face value of $325 million that mature in 14 years. The bonds carry…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: A European call option and a European put option on a stock both have a strike price of $45 and…

A: According to Put call parity theory there is certain relationship between Put,Call and Stock Price…

Q: Dyl Inc.'s bonds currently sell for $900 and have a par value of $1,000. They pay an $80 annual…

A: Solution:-Yield to maturity refers to the annual return earned by bond holder, if the bond is held…

Q: In cell E16, enter the appropriate formula to calculate the probability of either rolling a 7 or 11.

A: The objective of the question is to calculate the probability of rolling a 7 or 11 on a pair of…

Q: Morgan Fillmore's lifelong dream is to own his own fishing boat to use in his retirement. Morgan has…

A: Present value of  amount is computed as follows:-PV = FV*PVFwhereFV= future valuePVF = present…

Q: ist 2 You are considering opening a new plant. The pland will cost $95.1 milion up front and will…

A: Net present value and internal rate of return are capital budgeting techniques used to evaluate…

Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $500 million and…

A: Here,Initial Investment is $500 millionAnnual Inflows is $71.6 millionDiscount Rate is 12.2%Time…

Q: Yoko's aunt ask's her to to analyze Bond XYZ: Bond Face Value = $1000 Coupon = 12%, paid…

A: Current Yield of the bond is calculated by following formula:-Current Yield of the bond =

Q: Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The…

A: The value of the equity can be found by using the average return after assigning weights and…

Q: If the D/E ratio of a firm is 1.4, what is the firm's weight on equity? Hint: the formula is on your…

A: Debt to Equity Ratio = de = 1.4

Q: Ryan Enterprises forecasts the free cash flows (in millions) shown below. Assume the firm has zero…

A: Weighted Average Cost of Capital = r = 13%Growth rate after year 3 = g = 4%Free Cash flow for year 1…

Q: You have been given the following return information for a mutual fund, the market index, and the…

A: Jensen's is a risk-adjusted performance metric. This indicates the average return on a portfolio or…

Q: You are saving to buy a new car in two years.  You currently have $5000 in an account that pays 4%…

A: The FV of an investment refers to the combined worth of the cash flows of the investment at a…

Q: Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different…

A: Given data:> Exsting beta = 0.65> selling stock beta = 1> purchasing stock beta = 1.60

Q: (Related to Checkpoint 9.1) (Floating-rate loans) The Bensington Glass Company entered into a loan…

A: London Interbank Offered Rate (LIBOR):It serves as a reference point for setting various financial…

Q: ng Electronics Inc. has developed a new DVD-R. If the DVD-R is successful, the PV of the payoff…

A: NPV is the difference in PV of cash flow and initial investment and it must be positive to be…

Q: FM Foods is evaluating its cost of capital. Use the following information provided on December 31,…

A: The objective of the question is to calculate the after-tax cost of equity capital for FM Foods.…

Q: Adama's Fish Market Inc. issued a bond that will mature in 15 years. The bond has a face value of…

A: Compound = Semiannually = 2Time Until Mature = tm = 15 * 2 = 30Face value = fv = $1000Coupon Rate =…

Q: A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). Note: A negative…

A: NPV = 0Equity = $540,000Issue cost = 15.85% of net proceedNet proceed = Gross proceeds / (1 + issue…

Q: Given the information below on peer companies A-D, calculate the beta for company E if it has net…

A: Beta of an investment:The beta of an investment measures its volatility in relation to the overall…

Q: Taussig Technologies Corporation (TTC) has been growing at a rate of 18% per year in recent years.…

A: Here,Super normal growth rate is 18%, ConstantGrowth Rate is 8%, D0 is $2.10rs is 9%

Q: compounded quarterly for 5 years. How many times was the loan compounded (what is the number of…

A: In compounding there is interest on interest including interest on the amount of orginal amount of…

Q: You are saving to buy a new car in two years.  You currently have $5000 in an account that pays 4%…

A: Future value refers to the accumulated amount in the fund account by compounding of the amount at…

Q: The common stock of Flavorful Teas has an expected return of 16.80 percent. The return on the market…

A: Expected return = 16.80%Market Return = 10%Risk-free rate =3.2%Required:Beta of Stock =?

Q: Given the information below for StartUp Company, compute the expected share price at the end of 2022…

A: Price-to-earnings ratios can be used to find the current worth of the stock for the year 2022. In…

Q: Given the following information, calculate the net present value: Initial outlay is $50,000;…

A: The NPV of a project refers to the measure of the profitability of the project as it discounts the…

Q: Calculate the initial outlay and depreciable value of the project. Determine the terminal year (in…

A: The value of cash available to a corporation after covering the costs of doing business is measured…

Q: Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the…

A: The AFN refers to the funding that is required by the company for its operations to reach the…

Q: Company  XYZ is  investors expect earnings and dividends to grow at a constant rate of 8% in the…

A: Solution:Dividend Discount Model (DDM) is the equity model which calculates the current value of…

Q: Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two…

A: Payback period is capital budgeting technique used for making investment decisions.It is time…

Q: Splish Brothers Inc. issues $520,000, 20-year, 10% bonds at 102. Prepare the journal entry to record…

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Q: The following graph represents the money market for some hypothetical economy. This economy is…

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Q: Rally, Inc, is an all-equity firm with assets worth $55 billion and 11 billion shares outstanding…

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Q: Brew Ltd. introduced a new product, DV, to its range last year. The machine used to mould each item…

A: Discounted Payback Period refers to the period or duration within which the company is able to…

Q: Problem 1: Nachman Industries just paid a dividend of D = $1.32. Analysts expect the company's…

A: Current Dividend = d0 = $1.32Growth Rate for Year 1 = g1 = 30%Growth Rate for Year 2 = g2 =…

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A: The automotive industry, characterized by its dynamic nature, faces a multitude of challenges and…

Q: Calculating the Total Interest Payment for a negative amortizing CPM:   $100,000 Mortgage   7%…

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Q: Crossfade Corporation has a bond with a par value of $2,000 that sells for $1,917.12. The bond has a…

A: Solution:-Yield to maturity refers to the annual return earned by bond holder, if the bond is held…

Q: Logistics accounts for about what percent of the U.S. gross domestic product?

A: Logistics Accounts for about 8-9 percent of the U.S. Gross Domestic Product .Logistics play a…

Q: will be 26% debt financed, and you anticipate its debt cost of capital will be 5%. If its corporate…

A: The weighted average cost of capital measures the typical cost a business pays to finance its…

Q: (Payback period, net present value, profitability index, and internal rate of return calculations)…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…