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linda_us
linda_us, Master's Degree
Category: Business and Finance Homework
Satisfied Customers: 7038
Experience:  A tutor for Business, Finance, Accounts and other related topics.
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Submitted: 10 months ago.
Category: Business and Finance Homework
Expert:  linda_us replied 10 months ago.
Thanks for requesting me. Please post your questions.
Customer: replied 10 months ago.














 






















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 D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, what is the stock’s expected total return for the coming year? (Points : 10)

7.54%
7.73%
7.93%
8.13%
8.34%
















3. (TCO D) Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? (Points : 10)

$104.27
$106.95
$109.69
$112.50
$115.38
















4. (TCO E) Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting? (Points : 10)

Long-term debt
Accounts payable
Retained earnings
Common stock
Preferred stock
















5. (TCO E) The MacMillen Company has equal amounts of low-risk, average-risk, and high-risk projects. The firm's overall WACC is 12%. The CFO believes that this is the correct WACC for the company’s average-risk projects, but that a lower rate should be used for lower-risk projects and a higher rate for higher-risk projects. The CEO disagrees, on the grounds that even though projects have different risks, the WACC used to evaluate each project should be the same because the company obtains capital for all projects from the same sources. If the CEO’s position is accepted, what is likely to happen over time?(Points : 10)

The company will take on too many high-risk projects and reject too many low-risk projects.
The company will take on too many low-risk projects and reject too many high-risk projects.
Things will generally even out over time, and, therefore, the firm’s risk should remain constant over time.
The company’s overall WACC should decrease over time because its stock price should be increasing.
The CEO’s recommendation would maximize the firm’s intrinsic value.
















6. (TCO D) Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 1.30. Based on the CAPM approach, what is the cost of common from retained earnings? (Points : 10)

9.67%
9.97%
10.28%
10.60%
10.93%
















7. (TCO F) Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected.

WACC: 10.00%
Year 0 1 2 3
-----------------------------------------------
Cash flows -$1,050 $450 $460 $470
(Points : 10)

$ 92.37
$ 96.99
$101.84
$106.93
$112.28
















8. (TCO F) Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected.

Year 0 1 2 3 4 5
-------------------------------------------------------------------------------------
Cash flows -$9,500 $2,000 $2,025 $2,050 $2,075 $2,100
(Points : 10)

2.08%
2.31%
2.57%
2.82%
3.10%
















9. (TCO F) Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?

WACC: 10.00%
Year 0 1 2 3
---------------------------------------------
Cash flows -$900 $500 $500 $500
(Points : 10)

1.88 years
2.09 years
2.29 years
2.52 years
2.78 years










10. (TCO H) TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its three-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s three-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project’s NPV? (Hint: Cash flows are constant in years 1-3.)








WACC
Pre-tax cash flow reduction for other products (cannibalization)
Investment cost (depreciable basis)
Straight-line deprec. rate
Sales revenues, each year for three years
Annual operating costs (excl. deprec.)
Tax rate
10.0%
$5,000
$80,000
33.333%
$67,500
$25,000
35.0%

a. $3,636
b. $3,828
c. $4,019
d. $4,220
e. $4,431


Indicate your choice for your answer - a,b,c,d,e first and then show your work/explain your answer so as to earn partial credit in the event you selected the incorrect answer.


(Points : 10)














Time Remaining:
Expert:  linda_us replied 10 months ago.
Working on it.
Customer: replied 10 months ago.

thanks

Expert:  linda_us replied 10 months ago.
linda_us, Master's Degree
Satisfied Customers: 7038
Experience: A tutor for Business, Finance, Accounts and other related topics.
linda_us and other Business and Finance Homework Specialists are ready to help you
Customer: replied 10 months ago.

Thank U Linda. I have another assessment 10/19 sat. Please have some time available.

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Expert:  linda_us replied 10 months ago.
Sure, We can setup some time for that day.
Customer: replied 10 months ago.

Hello Linda,


 


I just to confirm our appointment on 10/19 Sat. I am thinking around 10am?


 


Thanks


 


Taran

Expert:  linda_us replied 10 months ago.
That is good for me.

We will just re-confirm the same on Friday as well.
Customer: replied 10 months ago.

alright sounds good. Enjoy rest of your sunday

Expert:  linda_us replied 10 months ago.
Take care.
Customer: replied 10 months ago.

Hi Linda,


 


are you ready for my time assessment?

Expert:  linda_us replied 10 months ago.
I am currently out as my son got ill. When I get back I will let you know. Sorry about that.
Customer: replied 10 months ago.

Oh so sorry to hear that.


 


We can set up a time for a evening if you will be back by then.

Expert:  linda_us replied 10 months ago.
Thanks for understanding.

Do you want to meet at 9 PM EST tonight?
Customer: replied 10 months ago.
Hi can we do it tomorrow morning if u do not mind?
Expert:  linda_us replied 10 months ago.
1 PM EST?
Customer: replied 10 months ago.

Sounds good i am confirming. Plz confirm

Expert:  linda_us replied 10 months ago.
Confirmed.
Customer: replied 10 months ago.

See you tomorrow

Customer: replied 10 months ago.

hi linda U there?

Expert:  linda_us replied 10 months ago.
Yes I am here but this reply was not received by me for some reason.

I just came to this post to inquire and saw your post. Shall we start now?
Customer: replied 10 months ago.

yes i am ready whenever u are?

Expert:  linda_us replied 10 months ago.
I am. Please post your questions.

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