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Corporate Finance

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Alton Industries plans to distribute cash to its

shareholders at the end of this year (12 months from now) by paying a

$6,2 dividend per share and spending an additional $2,6

per share on share

repurchases. The CFO anticipates that the firm’s earnings will grow by

3,5%

annually indefinitely. Assuming that ALTON’s equity cost of capital remains at

17,5%

and the payout policy stays the same, what is the company’s current stock

price? Write your answer to two decimal places.

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ABAM Company specializes in manufacturing coffee machines

for export and has been listed on your country’s stock exchange for several

years. Currently, its stock is trading at

$26,42

per share. Recently, the

company paid a dividend of

$2,18

per share, which is expected to grow steadily

at a rate of

2,16%

per year in perpetuity. Based on this information, what is ABAM

Company’s cost of equity capital? Write your answer to two decimal places.

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A company cannot pay dividends in a given year if it reports a net loss for that year.
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A bond issued by Horizon Capital is currently trading at 96.8% of its $1,000 face value. The bond matures in 9 years and has a yield of 7.6%. The bond will be repaid at par. Based on this information, what is the bond’s annual coupon payment? The answer is closest to:
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Which of the following is not considered a reason for a company to repurchase its shares?
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You have been working at a renewable energy company since completing your bachelor’s degree at MBS. The company has developed an innovative wind turbine technology and holds exclusive rights to its use for the next 15 years. It is anticipated that the cash inflows from this technology will be $5 million in the first year, growing at a rate of 8% annually until the 15th year, when the exclusivity expires. After this period, competitors are expected to adopt similar technologies, reducing cash inflows to zero. What is the present value of this innovative wind turbine technology, assuming a discount rate of 12% per year?
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Six years ago, Lyon Capital Group issued a 26-year bond with a face value of $1,000. The bond pays an annual coupon of 4.7%, and it will be redeemed at maturity at a 1.6% premium. If the bond’s current yield to maturity is estimated at 8.83%, the current price of the bond is closest to:
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Six years ago, ABAM company issued a zero-coupon bond with a face value of $1,000 and a maturity of 17 years. The bond now has 11 years remaining until maturity. If the bond is currently priced at $509, the yield to maturity is closest to:
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Aurora Engines currently has a share price of $29. If Aurora is expected to pay a dividend of $2.75 in one year and its stock price is projected to rise to $30.75 over the same period (thus, in one year), then the firm’s dividend yield and equity cost of capital are:
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