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# McLaughlin Incs stock has a required rate of return of 10.50%

### Resolved Question:

McLaughlin Inc's stock has a required rate of return of 10.50% and it sells for \$67.50 per share. McLaughlins dividend is expected to grow at a constant rate of 7.0% per year. What is the expected year-end dividend, D1?

Suppose you believe that Johnson Company's stock price is going to increase from its current level of \$22.50 sometime during the next five months. For \$310.25 you can buy a 5-month call option giving you the right to buy 100 shares at a price of \$25 a share. If you buy this option for \$310.25 and Johnson's stock price actually rises to \$45, what would your pre-tax net profit be?

Anderson associates is considering two mutually exclusive projects that have the following cash flows: Project A: -10,000, 1,000, 2,000, 6,000, 6000. Project B: -8,000, 7,000, 1,000, 1,000, 1,000. At what rate of capital do the two projects have the same net present value? (That is, what is the crossover rate?)
Submitted: 8 years ago.
Category: Homework
Expert:  Linda_us replied 8 years ago.