For a price of $6, Carlos will sell you a share which will pay a dividend of $1 in one year and every year after that forever. The required return of the stock is 10% pa.
A company has:
- 140 million shares outstanding.
- The market price of one share is currently $2.
- The company's debentures are publicly traded and their market price is equal to 93% of the face value.
- The debentures have a total face value of $50,000,000 and the current yield to maturity of corporate debentures is 12% per annum.
- The risk-free rate is 8.50% and the market return is 13.7%.
- Market analysts estimated that the company's stock has a beta of 0.90.
- The corporate tax rate is 30%.
What is the company's after-tax weighted average cost of capital (WACC) in a classical tax system?
You want to buy an apartment worth $400,000. You have saved a deposit of $80,000. The bank has agreed to lend you the $320,000 as a fully amortising mortgage loan with a term of 30 years. The interest rate is 6% pa and is not expected to change. What will be your monthly payments?
A text book publisher is thinking of asking some teachers to write a new textbook at a cost of $100,000, payable now. The book would be written, printed and ready to sell to students in 2 years. It will be ready just before semester begins.
A cash flow of $100 would be made from each book sold, after all costs such as printing and delivery. There are 600 students per semester. Assume that every student buys a new text book. Remember that there are 2 semesters per year and students buy text books at the beginning of the semester.
Assume that text book publishers will sell the books at the same price forever and that the number of students is constant.
If the discount rate is 8% pa, given as an effective annual rate, what is the NPV of the project?
In late 2003 the listed bank ANZ announced a 2-for-11 rights issue to fund the takeover of New Zealand bank NBNZ. Below is the chronology of events:
- 23/10/2003. Share price closes at $18.30.
- 24/10/2003. 2-for-11 rights issue announced at a subscription price of $13. The proceeds of the rights issue will be used to acquire New Zealand bank NBNZ. Trading halt announced in morning before market opens.
- 28/10/2003. Trading halt lifted. Last (and only) day that shares trade cum-rights. Share price opens at $18.00 and closes at $18.14.
- 29/10/2003. Shares trade ex-rights.
All things remaining equal, what would you expect ANZ's stock price to open at on the first day that it trades ex-rights (29/10/2003)? Ignore the time value of money since time is negligibly short. Also ignore taxes.
You own a nice suit which you wear once per week on nights out. You bought it one year ago for $600. In your experience, suits used once per week last for 6 years. So you expect yours to last for another 5 years.
Your younger brother said that retro is back in style so he wants to wants to borrow your suit once a week when he goes out. With the increased use, your suit will only last for another 4 years rather than 5.
What is the present value of the cost of letting your brother use your current suit for the next 4 years?
Assume: that bank interest rates are 10% pa, given as an effective annual rate; you will buy a new suit when your current one wears out and your brother will not use the new one; your brother will only use your current suit so he will only use it for the next four years; and the price of a new suit never changes.
In the dividend discount model:
### P_0= \frac{d_1}{r-g} ###
The pronumeral ##g## is supposed to be the:
Question 636 option, option payoff at maturity, no explanation
Which of the below formulas gives the payoff ##(f)## at maturity ##(T)## from being long a call option? Let the underlying asset price at maturity be ##S_T## and the exercise price be ##X_T##.
A firm conducts a two-for-one stock split. Which of the following consequences would NOT be expected?
Question 811 log-normal distribution, mean and median returns, return distribution, arithmetic and geometric averages
Which of the following statements about probability distributions is NOT correct?