for the riskiness of the project. The average return on equity for Ameritrade from 1975 to 1996 was 40% and recent returns were much higher‚ with each of the most recent five years having larger returns than the 40% average. Ricketts understood that the plan would only create value if the investment returned more than it cost‚ but what was the cost of capital. The key questions to answer this problem are: 1. What is the estimate of the risk-free rate that should be employed in calculating the cost
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has loaned money to his brother at an interest rate of 5.75 percent. He expects to receive $625‚ $650‚ $700‚ and $800 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.) PV of multiple cash flows: Hassan Ali has made an investment that will pay him $11‚455‚ $16‚376‚ and $19‚812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these
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stated in the executive summary‚ the GlobaLove financial goal is to achieve a 81% rate of return on the initial investment. In this situation‚ each shareholder will receive $24.43 dividend per share. In order to achieve the financial goal of 81% return on investment‚ GlobaLove must make a net profit of $733.00 by selling $1‚800.00 worth of products. (Scenario 2) There are several factors which will affect the return on investment; fixed costs‚ variable costs‚ product pricing‚ and cost per unit. In
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Microeconomics: Week 1 Review Questions 1) Suppose that the wages of young high school graduates fell. In what sense has the true “cost” of a college education been changed by this development. Other things equal‚ if wages of young high school graduates decline‚ the potential alternative use of time spent studying in higher education…namely‚ working with only a high school education…has relatively less value. Therefore‚ the opportunity cost of student study time measured in foregone wages is
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year-end dividend of $2.00‚ i.e.‚ D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = 5%). If the company is in equilibrium and its expected and required rate of return is 15%‚ which of the following statements is CORRECT? Answer d. The company’s expected stock price at the beginning of next year is $9.50. 5. If a stock’s dividend is expected to grow at a constant rate of 5% a year‚ which of the following statements is CORRECT? The stock is in equilibrium
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Auctions – Objectives‚ Constraints‚ Strategy‚ Allocation‚ Execution‚ Evaluation‚ Adjustments IPS Constraints – URLIT - Unique‚ Regulatory/legal‚ Liquidity‚ tIme‚ Tax TDA vs. TEA – Higher Enders Take TEA – Higher Ending Tax rate TEA better Residence vs. Source – Pay Greater rate with Credit‚ Exempt Source Income‚ Deduct Paid Taxes If our Human Capital is Bond-like‚ we should invest more aggressively (equity) and our demand for life insurance increases. -------------------------------------------------
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the world‚ the existence of small businesses can stimulate the economy and hopefully improve the economies all around the world. Finally small businesses are important because it can provide more job opportunities for people so that the unemployment rate is low. Introduction: We tried to make a financial statement on our Grocery Shops. With some direct information and internet information we have made this report. We are the group member tried our best to make this report. Here we complete the balance
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The treasury bill rate at the time was 5.8%‚ and the treasury bond rate was 6.4%. The firm had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; the corporate marginal tax rate was 36%. a. Estimate the expected return on the stock for a short term investor in the company. b. Estimate the expected return on the stock for a long‐term investor in the company. c. Estimate the cost of equity for the company. a. We use the CAPM: The Expected Return on the stock = 0
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Bay in a steady stream‚ the vagaries of lockage transfer times in the Seaway resulted in quite variable arrival times‚ at times forcing arriving ships to anchor when both wharfs were busy. This resulted in SGE having to incur demurrage charges at a rate of $2000 per day. Mike Armstrong‚ manager of port facilities for SGE‚ had just learned that the Canadian Government had negotiated a 5-year contract with Poland‚ and that Superior had been allocated some of the shipments. However‚ the two wharfs Superior
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are planning to save for retirement over the next 30 years. To do this‚ you will invest $700 a month in a stock account and $300 a month in a bond account. The return of the stock account is expected to be 10 percent‚ and the bond account will pay 6 percent. When you retire‚ you will combine your money into an account with an 8 percent return. How much can you withdraw each month from your account assuming a 25-year withdrawal period? A: FVStock=700*(1+0.112)360-10.112=1582341.55 FVbond=300*(1+0
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