Financial Ratios: What They MeanIn assessing the significance of various financial data‚ managers often engage in ratio analysis‚ the process of determining and evaluating financial ratios. A financial ratio is a relationship that indicates something about a company’s activities‚ such as the ratio between the company’s current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company’s financial statements that contain
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in e) is $113.37 and $50.82 There is a difference between the above values because the there is a difference in the growth rate in part a) the stock price is based on the current book value. In part d) the value of stock is calculated by using the dividend model of growth rate and the growth is taken up to be constant. And lastly in the e) part the value of stock is calculated by taking up two growth rates for different time so the price of stock is different. The valuation of stock in e) part is the
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value options on a stock paying a dividend yield‚ we know how to value options on stock indices and currencies.” Explain this statement. 3. Explain how corporations can use range-forward contracts to hedge their foreign exchange risk. 4. Calculate the value of a three-month at-the-money European call option on a stock index when the index is at 250‚ the risk-free interest rate is 10% per annum‚ the volatility of the index is 18% per annum‚ and the dividend yield on the index is 3% per annum
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Corporate Finance Home Wok Chapter 4 Q1: Simple Interest versus compound Interest First City Bank pays 9 percent simple interest on its savings account balances‚ whereas Second City Bank pays 9 percent interest compounded annually. If you made a $5‚000 deposit in each bank‚ how much more money would you earn from your Second City Bank account at the end of 10 years? A: First City Bank: 5000*(1+10*0.09)=9500 Second City Bank: 5000*(1+0.09)10=11837 11837-9500=2337 So we will earn more $2‚337 from
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earnings. Retained earnings are determined by dividend payout. The spreadsheet sets ROE at 15% for the five years from 2006 to 2010. If Reeby Sports will lose its competitive edge by 2011‚ then it cannot continue earning more than its 10% cost of capital. Therefore ROE is reduced to 10% starting in 2011. The payout ratio is set at .30 from 2006 onwards. Notice that the long-term growth rate‚ which settles in between 2011 and 2012‚ is ROE × ( 1 – dividend payout ratio ) = .10 × (1 - .30) = .07.
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INCOME TAXES AND DIVIDEND POLICY The income taxes of stockholders should affect the dividend policy of a firm. To help you understand these tax implications‚ we shall first examine the importance of tax deferral and then show the impact of having two different tax rates‚ one for ordinary income and one for capital gains. Rational stockholders should value a stock based on the after-tax returns they expect to receive from owning it. The tax status of the return depends on the form in which it is
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India China - demographic dividend.txt Eye On: Demographics: India and China: Twin Stories of Progress? Posted by Adrienne Villani on September 24‚ 2010 This article was originally published in our new‚ redesigned fortnightly e-magazine. Sign up today! Three decades from now‚ China and India will have vastly divergent demographics. Demography underpins every segment of what is termed development – it drives the choices people make in their everyday lives‚ whether a country’s resources can sustain
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Question 1 of 20 5.0 Points Alicia Cooper makes sure to contribute ten percent of her monthly earnings to her 401(k) plan at work. Her 401(k) plan allows her to invest in several different types of mutual funds. Which suggestion for the obtaining money she needs for investing is she following? A. Paying herself first B. Taking advantage of employer-sponsored retirement programs C. Participating in an elective savings program D. Making a special effort once or twice a year to save
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Notes Payable to bank 31‚500‚000 common stock ($10 par; 1‚000‚000) 10‚000‚000 Retained earnings 98‚500‚000 Describe how each of these account would appear after: A cash dividend of $1 per share Cash will decrease by $1‚000‚000. Retained earnings will decrease by $1‚000‚000. All other accounts are not affected. A 10 percent stock dividend (fair market value of stock is $13 per share) Common stock will increase by $100‚000 (1‚000‚000 x 10% x $1) Retained earnings will decrease by $1‚300‚000 (1‚000‚000
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1. Tom believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company? Electronic Timing‚ Inc. (ETI) needs to be careful on how it dispenses the extra cash as a dividend. Issuing the extra cash as a dividend would mean that the shareholders collectively will probably drop by the same amount because of the transfer of wealth from the company to the shareholders individually. Hence‚ the
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