Finance

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Calculation of Value of a Share of Stock

Question Polly Corporation just paid a dividend of $1.65 per share. The company expects that the dividend will grow at a rate of 8% for next four years. After year four it is expected that the dividend will decline at a rate of 2.5% indefinitely. If the required return is 12%, what is the value of ... Read More

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Calculation of Market Value of a Share of Stock

Question Al Oft, CEO of Balloons, Inc, predicts that the company will pay a steady dividend of $.42 per share in each of the next three years. After this, he expects the dividend to increase at a rate of 12% for years 4 and 5. After year 5, the dividend will grow at a perpetual rate of 3%. What is ... Read More

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Supernormal Growth of Dividends in Short Term

Question Explain how supernormal growth of dividends is possible, but only in the short-term?   Summary: This question belongs to finance and discusses about how supernormal growth of dividends is possible in the short-term. Total word count: 72   ... Read More

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Change in the Price of a Bond When Yield to Maturity Increases

Question An 11-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $2,100. What is the change in the price of this bond if the market yield to maturity increases to 5.5 percent, from the current market rate of 4.5%?  Summary: This question belongs to finance and ... Read More

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Research Project on Dividend Policy

Question Research project on dividend policy: A large number of theories have been developed in this area. Extensive empirical tests have also been carried out and reported in the literature. The general expectation is that you need to carry out a literature review, empirically test an establishe ... Read More

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Backwardation or Contango of a Market

Question The United States Oil Fund (ticker: USO) is a popular exchange-traded security that is designed to track changes in the price of oil (specifically, West Texas Intermediate or WTI). Since spot oil is expensive to store, the fund uses futures contacts to generate its returns. In simplified f ... Read More

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Comparison of Short Plain Vanilla Forward with Short Target Forward Contract

Question This question concerns a simplified version of the target forwards contract introduced in class during the Aracruz Cellulose discussion. You are comparing two alternatives: A short plain vanilla forward contract with a delivery price of K1 = 100; and A short target forward with a ... Read More

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Comparison of Short Plain Vanilla Forward Contract with Short Target Forward Contract

Question Assume that the one-month rate of interest is zero. What does the decomposition of the target forward in Part 2 tell you about the value of the call option embedded in the target forward? Use the following steps: From the information given in the question, the plain vanilla forward with ... Read More

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Valuation and Market Estimation of Alibaba Prospects

Question This question concerns Alibaba the internet e-commerce firm that recently went public. It is an open ended question that requires you to utilize the valuation techniques you have learnt in the course and also to do independent research. Research Alibaba’s business model, particula ... Read More

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Portfolio of the Company Dangote Cement PLC

Question Dangote Cement Plc is a Nigeria based producer of cement. Its head office e is based in Lagos Nigeria.  The Company is engaged in the preparation, manufacture, control, research, sale and distribution of cement and related products. The production activities of the Company are underta ... Read More

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Cash Flow Statements of Fenwicke Company

Question Fenwicke Company organized and began operating a subsidiary in a foreign country on January 1, 2015, by investing LCU 68,000. This subsidiary immediately borrowed LCU 170,000 on a five-year note with 6 percent interest payable annually beginning on January 1, 2016. The subsidiary t ... Read More

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Project Analysis and Operating Leverage for a New Product Launching Project

Question Project Analysis and Operating Leverage For a new product launching project, you find that the project will cost $600,000, have a five-year life with no salvage value, depreciation is straight line to zero. Sales are projected at 250 units per year and the selling price per unit will be ... Read More

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