You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $497,000 today, plus $497,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 7 percent, what is the present value of the cash flow stream that the company is offering you .... Read More

PROBLEM 2The Talley Healthcare System had a taxable income of $365,000 from operations after all operating costsbut before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000,and (4) income taxes.a. What is the firm's income tax liability and its after-tax income?b. What are the firm's marginal and average tax rates on taxable income? .... Read More

anicek Corp. is experiencing rapid growth. Dividends are expected to grow at 28 percent per year during the next three years, 18 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $62 per share. What is the projected dividend for the coming year? .... Read More

The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock? .... Read More

A thirty- year U. S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten- year Treasury bond has an interest rate of 2.5 percent. A maturity risk premium is estimated to be 0.2 percentage points for the longer maturity bond. Investors expect inflation to average 1.5 percentage points over the next ten years. a. Estimate the expected real rate of return on the ten- year U. S. Treasury bond. b. If the real rate of return is expected to be the same for the thirty- year bond as for .... Read More

21st Century Cat is a film producing company which is contemplating the productionof a new film. They estimate that:The production of the film will require an investment of Â£300,000 in year 0.The distribution will generate a stream of cash flows equal to Â£200,000 in year 1, andÂ£100,000 in each of years 2 and 3.In year 3, the producer will sell the rights to a tv broadcaster for Â£90,000.Distribution costs will be Â£75,000 in year 1, and Â£50,000 in each of years 2 and 3.Due to .... Read More

Bonds 1. Bond. What is the value of a $1,000 par value bond with annual payments of an a. 10% coupon with a maturity of 10 years and a 15% required return? b. 8% coupon with a maturity of 10 years and a 8% required return? c. 11% semiannual coupon with a maturity of 20 years and a 11% required return? d. 8% semiannual coupon with a maturity of 20 years and a 9% required return? 2. Bond. What is the yield to maturity of a $1000 par value .... Read More

Central City Construction (CCC) needs $3 million of assets to get started, and it expects to have a basic earning power ratio of 20%. CCC will own no securities, so all of its income will be operating income. If it chooses to, CCC can finance up to 40% of its assets with debt, which will have an 7% interest rate. Assuming a 40% tax rate on all taxable income, what is the difference between CCC's expected ROE if it finances with 40% debt versus its expected ROE if it finances entirely .... Read More

Many years ago, Minnow Bait and Tackle issued preferred stock. The stock pays an annual dividend equal to $6.80. If the required rate of return on similar risk investments is 8 percent, what should be the market value of Minnowâ€™s preferred stock? . .... Read More