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Finance questions

I NEED TOTALLY CONFUSSED AND DONT KNOW HOW TO DEAL WOTH IT. SO IF YOU CAN HELP ME OUT WOULD BE GREAT. 9. Break-Even. Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $30. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs $1 million and is depreciated straight-line over 10 years to a salvage value of zero. 21. Operating Leverage. A project has fixed costs of $1,000 per year, depreciation charges of $500 a year, revenue of $6,000 a year, and variable costs equal to two-thirds of revenues. a. If sales increase by 5 percent, wh... click for more

Subject:

Business

Topic:

Finance

Posting ID:

15501

OTA ID:

101733

Problems - Time value of money

1) A company plans to buy 34 jets for 120,000,000. Flight operations cost 7000000 and ground costs are 4000000 per year. The company expects to sell 300000 tickets and variable costs are expected to be 20% of revenue. With a 14% required rate of return, what annual revenue is needed to justify the purchase. Assumption is 20 year life and no salvage value at the end of 20 years. 2) A corporation has annual income of 4 million and has 1 million shares of stock outstanding. The company has no expansion opportunities and depreciation equals the replacement cost to maintain the current level of output, so income is available to distribute as dividends and is expected to continue indef... click for more

Subject:

Business

Topic:

Finance

Posting ID:

15556

OTA ID:

103477

2-stage Dividend Discount Model

Using 2-stage DDM and CAPM to value stocks: Beta of company: 1.15 Market price: $30 Intrinsic value: ? Risk-free rate 4.50% Expected market return: 14.5% EPS and dividend growth rates for first 3 years: 12% per year EPS and dividend growth rates thereafter: 9% per year Estimate the intrinsic value oif the company using the data and the 2-stage dividend discount model.

Subject:

Business

Topic:

Finance

Posting ID:

16182

OTA ID:

101733

Evaluation of a company: three-stage dividend growth model with declining growth

I am evaluating a firm using the three-stage dividend growth model with a linearly declining growth rate in Stage 2. I am using the following information (as of the start of 2004): * Current dividend is $0.39 * I estimate the required rate of return on the stock at 8.72% * In stage 1, the dividend will grow at 11.3 percent annually for the next 5 years. * In stage 2, which will last 10 years, the dividend growth rate will decline linearly, starting with the Stage 1 rate and ending at the stage 3 rate. * The equilibrium long-term dividend growth rate (in Stage 3) will be 5.7 percent. What is my valuation of this company? It is currently selling for $25 dollars.

Subject:

Business

Topic:

Finance

Posting ID:

16196

OTA ID:

101733

dividend growth models

What is an inherent weakness of all dividend growth models?

Subject:

Business