Exercise Cost of Capital 1. Lancaster Engineering Inc. (LEI) has the following capital structure‚ which is considers to be optimal: Debt 25% Preferred stock 15 Common equity 60 100% LEI’s expected net income this year is $34‚285.72‚ its established dividend payout ratio is 30 percents‚ its federal-plus-state tax rate is 40 percent‚ and investors expect earnings and dividends to grow at a constant rate of 9 percent in the future. LEI paid a dividend of $3.60 per share
Premium Dividend yield Finance Stock
Section 6 Study Questions (9.0 points) Answer each question fully. Complete sentences are not necessary. Lesson 1 (3.0 points) 1. What is a pure risk? (0.5 points) A risk of something negative happening‚ with no possibility of profit or gain. 2. Why do people take speculative risks? (0.5 points) Some people want to make money like in the stock market that’s a speculative risk because you never know when the stock market will go up or down. 3. What is meeting the
Premium Insurance Identity theft Consumer protection
6.29 Simple Interest versus Compound Interest [LO4] First Simple Bank pays 9 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually‚ what rate should the bank set if it wants to match First Simple Bank over an investment of 10 years? 6.32 Calculating Annuities [LO1] You are planning to save for retirement over the next 30 years. To do this‚ you will invest $800 a month in a stock account and $400 a month in a bond account.
Premium Investment Compound interest Time value of money
Sample Test_MT2_FINA 3101_summer_2013 ____ 1. Travis Corp.’s bonds currently sell for $1‚050. They have an 8% annual coupon rate and a 20-year maturity‚ but they can be called in 5 years at $1‚120. Assume that no costs other than the call premium would be incurred to call and refund the bonds‚ and also assume that the yield curve is horizontal‚ with rates expected to remain at current levels on into the future. Under these conditions‚ what rate of return should an investor expect to earn if
Premium Bond Bonds Stock
Cigarette volumes decline ~1.5%; EBIT up 18.0% Cigarette business reported 7.1% increase in net sales and 18.0% increase in EBIT as margins expanded 590bps. Volumes declined 1.5% as realizations increased 15%. 64mm cigarettes continued to report strong traction as ITC launched three new offers - ’Flake Galaxy’‚ ’Flake Liberty’ & ’Silk Cut Virginia’ in this segment in various markets. ITC has increased prices by another 2% in July mainly due to price increase in Gold Flake Filter which
Premium Business Expense Tobacco
Practice Exam Questions and Answers 1. The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.’s current balance sheet shows net fixed assets of $2‚500‚000‚ current liabilities of $1‚375‚000‚ and net working capital of $725‚000. If all the current assets were liquidated today‚ the company would receive $1.9 million in cash. The book value of the Widget Co.’s assets today is _____ and the market value
Premium Time value of money Dividend yield Net present value
The Venture Capital Division of Boeing has four projects on the table with three additional leverages of debt. As the financial analyst for the division I was given the task of evaluating the four capital budgeting projects. After evaluating each project I will recommend which project will bring the most value to shareholders and the firm. What is the cost of equity for each project at 0‚ 20%‚ and 50% leverage? From the information provided the cost of equity at 0‚ 20%‚ and 50% leverage was
Premium Weighted average cost of capital Corporate finance
Guidelines for the Project Paper: 1) The number of pages is between 50-100 pages including the references and appendix. The paragraph should be 1.5 line spacing‚ written in Times New Roman at 12 points fonts‚ must include table of content and page number. The format of the project paper shall follow the manual for bachelor degree project writing or APA manual. 2) The project paper must have at least 20 references such as journals‚ books‚ newspapers‚ magazines‚ interviews‚ internet etc. The
Free Reference Presentation
Chapter 2 Self Test (Answers are below) 1. Which of the following statements about accruals and cash flows is false? A. Company value can be determined by using accrual accounting numbers. B. Accrual accounting numbers are subject to accounting distortions. C. Cash flows are more reliable than accruals. D. Cash flows cannot be manipulated. 2. Financial accounting data has some inherent limitations. Which of the following are limitations? I. Not all economic events are easily quantifiable
Premium Generally Accepted Accounting Principles
Sofia Yanez Malik Homework6 1. What is a prior probability? Prior probability is the probability that is initially calculated based on the information or data that is available in that moment. 2. Explain the purpose behind using Bayes Theorem The purpose of the Bayes’ theorem is to revise previously calculated probabilities based on new information. 19.36 Again consider the oil company case that was described in Example 19.1. Recall that the oil company wishes to decide whether to drill
Premium Conditional probability Decision theory Probability theory