Assignment Techniques in Financial Analysis (FIN113) Assignment marks: 95 | Presentation marks: 5 Total marks: 100 SUBMISSION DETAILS Due date: By: 12 August 2013 5.00 pm AEST/AEDT Your assignment should be loaded into your Subject Room by 5.00 pm Australian Eastern Standard/Daylight-saving Time on the due date indicated above. CHECKLIST The question section of the assignment has eleven (11) pages. I have completed my assignment in the Assignment Answer Template downloaded from the Subject
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LECTURE 10 COST OF CAPITAL CLASS QUESTIONS 1. Roland Corporation’s last dividend (D0)‚ which was paid yesterday‚ was $2.50. The firm has a constant growth of 18.8%. The firm’s beta coefficient is 1.2. The required return on an average stock in the market is 13 percent‚ and the risk-free rate is 7 percent. Roland’s A-rated bonds are yielding 10 percent‚ its risk premium is 4% and its current stock price is $30. Which of the following values is the most reasonable estimate of Roland’s cost of
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1. (TCO D) A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%‚ and the constant growth rate is g = 4.0%. What is the current stock price? (Points : 10) $23.11 $23.70 $24.31 $24.93 $25.57 2. (TCO D) If D0 = $2.25‚ g (which is constant) = 3.5%‚ and P0 = $50‚ what is the stock’s expected dividend yield for the coming year? (Points : 10) 4.42% 4.66% 4.89% 5.13% 5.39% 3. (TCO D) Rebello’s
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BFIN 300 Financial Management FA14 Quiz 2 Solutions Conceptual/qualitative questions: 1. The capital gains yield plus the dividend yield on a security is called the total return. 2. Unsystematic risk can be effectively eliminated through portfolio diversification. 3. The excess return required from a risky asset over that required from a risk-free asset is called the risk premium. 4. The market risk premium is computed by subtracting the risk-free rate of return from the market rate of return. MRP
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1. Barker Corp. has a beta of 1.10‚ the real risk-free rate is 2.00%‚ investors expect a 3.00% future inflation rate‚ and the market risk premium is 4.70%. What is Barker’s required rate of return? Answer D | | | |2010 |21.00% | |2009 |-12.50% | |2008
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serves up sizzling dividend yields that top the 10-year Treasury. The yield comes with a side order of annual dividend hikes dating back to 1976. The annual dividend payment has gone from 55 cents per share in 2005 to $2.20 this year. Weaknesses: It will be harder and harder to find prime locations to build a set of golden arches. The U.S. is saturated with its restaurants‚ so growth will have to occur internationally‚ posing potential cultural challenges. While the annual dividend hikes are likely
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interests B. Stockholders’ objectives vs Bondholders’ objectives In theory: no conflict of interest In practice: Bondholders concerned more about safety and getting paid‚ stockholders most concerned about upside potentials Eg of conflict: increasing dividends‚ riskier projects C.Firm and financial markets In theory: Financial markets are efficient (ie managers convey info honestly and in timely manners; financial markets make reasoned judgements‚ not myopic) In practice: Holes in efficient markets assumption
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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
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2. Stock pricing (20 points) Colgate-Palmolive Co. has just paid an annual dividend of $0.96. Analysts are predicting an 11% per year growth rate in earnings over the next five years. After that‚ Colgate’s earnings are expected to grow at the current industry average of 5.2% per year. If Colgate’s equity cost of capital is 8.5% per year and its dividend payout ratio remains constant‚ what price does the dividend-discount model predict Colgate should sell for? 3. Bond pricing (15 points)
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of the Bush plan is to eliminate the taxes investors pay on dividend income. Currently‚ any money an investor receives when a stock she owns pays a dividend to its investors is added to her total income at tax time. So dividend income is treated the same way‚ and is taxed at the same rate‚ as income from working. If the Bush plan becomes law‚ dividend income will no longer be added to an investor’s total income. As a result the dividends become exempt from taxation. The exact details of the plan are
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