Finance final study guide Essay - 2210 Words

-Martin Industries just paid an annual dividend of $1.30 a share. The market price of the stock is $36.80 and the growth rate is 6.0 percent. What is the firms cost of equity? RE = [$1.30 Ãâ€" (1 + 0.060)] / $36.80 + 0.060 = 0.097446 = 9.74 percent (3) - The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.30 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 93 percent of its face value. What is the companys pre-tax cost of debt? (3) -Jensens Travel Agency has 9 percent preferred stock outstanding that is currently selling for $49 a share. The market rate of return is 15 percent and the firms tax rate is 34 percent. What is Jensens cost of†¦show more content†¦Your required rate of return is 9 percent. Ignoring taxes, what is the value of one share of this stock today? PV = ($0.75 / 1.09) + ($2.90 / 1.092) = $3.13 (1) - Merlo, Inc. maintains a debt-equity ratio of 0.25 and follows a residual dividend policy. The company has after-tax earnings of $3,800 for the year and needs $3,200 for new investments. What is the total amount Merlo will pay out in dividends this year?If debt = 0.25 and equity = 1, then debt + equity = 1.25. Equity portion of new investments = $3,200 Ãâ€" (1 / 1.25) = $2,560.00 Total dividends paid = $3,800 - $2,560.00 = $1,240.00 = $1,240 (rounded) (4) - A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,200 and other assets of $10,800. Equity is worth $12,000. The firm has 750 shares of stock outstanding and net income of $775. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase? Market value per share = Book value per share = $12,000 / 750 shares = $16 per share Number of shares repurchased = $1,200 / $16 per share = 75 shares Number of shares outstanding after the repurchase = 750 – 75 = 675 shares EPS after repurchase = $775 / 675 shares = $1.15 (2) - A firm has a market value equal to its book value. Currently, the firmShow MoreRelatedWhat is Finance Management?1598 Words   |  6 PagesWhat is finance management? â€Å"Financial Management is the Operational Activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation.† by Joseph Massie. What is capital market? â€Å"Are places where companies which need long term finance can meet investor† (business study guide, p120) P1.1- Identify the sources of finance available to new business you have chosen. 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