FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Suppose a friend lends you $2,000, and you agree to pay him back $2,345 in 4 years, what is the interest rate on this

1. Suppose a friend lends you $2,000, and you agree to pay him back $2,345 in 4 years, what is the interest rate on this loan?

2. You are considering the purchase of ABC Inc. stocks. You found that that they will pay $3 of dividends per share and the predicted sales price of the stock is $120 per share. Your required return on investment in equity is 5%, and the current stock of ABC Inc. trades at $118 per share. What is the current price of the ABC Inc. stock? Is the selling price higher or smaller than its valuation price? Would you purchase this stock?

Step by Step Solution

★★★★★

3.41 Rating (154 Votes )

There are 3 Steps involved in it

Step: 1

1 The interest rate on this loan is 11625 2 The current price of the ABC Inc stock is 118 The sellin... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles of Corporate Finance

Principles of Corporate Finance

Authors: Richard Brealey, Stewart Myers, Franklin Allen

13th edition

1260013901, 1260565553, 978-1260013900

More Books

Students also viewed these Economics questions

Question

★★★★★
b. What assumption must you make about the population distribution in order to construct the confidence interval estimate in (a)? c. Do you think that the assumption needed in order to construct the...

Answered: 1 week ago

Question

★★★★★
Do you think that the promotional mix will change over time? How might it be different in three years? Be sure to address this in your proposal.

Answered: 1 week ago

Question

★★★★★
Do you think that the factors which attract high-tech companies to these developing nation locations are going to be as important in ten years' time?

Answered: 1 week ago

Question

★★★★★
You invested $1000 in Sinoland Bank stock when Sinoland/US Dollar exchange rate was 10:1, and you received exactly 200 local shares of the stock. The stock price rises 23% in local currency terms,...

Answered: 1 week ago

Question

★★★★★
Acme Corporation has $100,000 of common shares outstanding and $200,000 of retained earnings at December 31, 2016. The board of directors passes a resolution at that date to restrict $80,000 of...

Answered: 1 week ago

Question

★★★★★
The following are four unrelated situations involving investments in available-for-sale securities: Situation I A portfolio of available-for-sale securities with an aggregate fair value in excess of...

Answered: 1 week ago

Question

★★★★★
2. Present new material. Make the purpose clear, teach in small steps, and provide many examples and nonexamples of the ideas and concepts you are teaching.

Answered: 1 week ago

Question

★★★★★
A bank's balance sheet information is shown below (in $000). 1. What is the bank's risk-adjusted asset base under Basel III? 2. To be adequately capitalized, what are the bank's CET1, Tier I, and...

Answered: 1 week ago

Question

★★★★★
PLEASE PROVIDE STEPS / EXPLAIN HOW TO SOLVE THIS QUESTION 2 You have just a sold a TWO-PERIOD call option on 100 shares of a $20 stock. In each of the next 2 periods the stock can go up 50% or fall...

Answered: 1 week ago

Question

★★★★★
Three emergency medical services employees were returning to their office in an ambulance after having had lunch. An EMT in the rear of the vehicle turned on the power to a manual cardiac...

Answered: 1 week ago

Question

★★★★★
Operating Leverage Decatur Co. reports the following data: Sales $794,000 Variable costs 460,500 Contribution margin $333,500 Fixed costs 240,900 Income from operations $92,600 Determine Decatur...

Answered: 1 week ago

Question

★★★★★
A rocket is launched from the ground and travels in a straight path. The angle of inclination of the rocket's path is 1.35 radians. (That is, the rocket's path and the ground form an angle measuring...

Answered: 1 week ago

Question

★★★★★
Suppose we have a uniform beam that is 60 centimetres long, and is simply supported at both ends. If the beam has a load of f(x) = 11 N/m applied to it, and has a flexural rigidity of 10,000 Nm,...

Answered: 1 week ago

Question

★★★★★
Crystal wants life insurance that will diversify her financial portfolio and build wealth. She is searching for a policy that uses an investment method that has the potential to grow at a maximum...

Answered: 1 week ago

Question

★★★★★
Mention and explain the job description of Distribution and Exhibition do fast and need correct answer with good explanation

Answered: 1 week ago

Question

★★★★★
3. Assignment Task Question No 1 a) Which is better, an investment that earns 10% compounded quarterly, one that earns 9.95% compounded monthly, or one that earns 9.9% compounded continuously? b) The...

Answered: 1 week ago

Question

★★★★★
i ng Suppose the interest rate on a year T-bondis o d that on a year bond intermediate calendations to decimal places will finale to della t o what is the marks forecast for your rates year from Bow!...

Answered: 1 week ago

Question

★★★★★
The Pletcher Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using...

Answered: 1 week ago

Question

★★★★★
What is the NPV of the electric scooter project under the following scenario? Unit sales are 20% below expectations. Unit price is 10% below expectations. Unit variable cost remains at 50% of...

Answered: 1 week ago

Question

★★★★★
1. What would Exactas true exposure be from its new U.S. operations, and how would it change from the companys current exposure? 2. Given that exposure, what would be the most effective and...

Answered: 1 week ago

Question

★★★★★
Table 29.11 shows Dynamic Mattress?s year-end 2016 balance sheet, and Table 29.12 shows its income statement for 2017. Work out the statement of cash flows for 2017. Group these items into sources of...

Answered: 1 week ago

Question

★★★★★
How does an evolutionary explanation differ from a functional explanation?

Answered: 1 week ago

Question

★★★★★
Suppose that two independent random samples were to be compared in terms of their variability. If the values in one of these samples were multiplied by the constant k, what would be the effect on the...

Answered: 1 week ago

Question

★★★★★
2. What are the special difficulties of studying the evolution of behavior, given that behavior doesnt leave fossils (with a few exceptions such as footprints showing an animals gait)?

Answered: 1 week ago

Previous Question Next Question