Monthly Archives: September 2015

Chrystal Telecom has budgeted the sales of its innovative mobile phone

Production Budget Chrystal Telecom has budgeted the sales of its innovative mobile phone over the next four months as follows: Sales in Units July………………………………………………………………………30,000 August………………………………………………………………….45,000 September…………………………………………………………..60,000 October……………………………………………………………….50,000 The company is now in the process of preparing a production budget for … Continue reading

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Union Bay Plastics is investigating the purchase of automated equipment

Uncertain Future Cash Flows Union Bay Plastics is investigating the purchase of automated equipment that would save $100,000 each year in direct labor and inventory carrying costs.  This equipment costs $750,000 and is expected to have a 10-year useful lift … Continue reading

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Miyamoto Jewelers is considering a special order for 10 handcrafted

Evaluating a special order Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracelets to be given as gifts to members of a wedding party.  The normal selling price of a gold bracelet is $389.95 and its unit … Continue reading

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A firm does not pay a dividend. It is expected to pay its first dividend of $0.25

Dividend Initiation and Stock Value A firm does not pay a dividend.  It is expected to pay its first dividend of $0.25 per share in two years. This dividend will grow at 10 percent indefinitely.  Using an 11.5 percent discount … Continue reading

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Paychex Inc. (PAYX) recently paid an $0.84 dividend

Expected Return Paychex Inc. (PAYX) recently paid an $0.84 dividend. The dividend is expected to grow at a 15 percent rate. At a current stock price of $40.11, what is the return shareholders are expecting? Here’s the SOLUTION

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Financial analysts forecast Limited Brands’ (LTD) growth rate for the future to be 12.5 percent

Value a Constant Growth Stock Financial analysts forecast Limited Brands’ (LTD) growth rate for the future to be 12.5 percent.  LTD’s recent dividend was $0.60.  What is the value of Limited Brands’ stock when the required return is 14.5 percent? … Continue reading

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Many more types of investments are available besides stocks, bonds, and cash securities

Integrated mini-case: Diversifying with Other Asset Classes Many more types of investments are available besides stocks, bonds, and cash securities.  Many people invest in real estate and in precious metals, primarily gold. What are the risk and return characteristics of … Continue reading

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A firm is expected to pay a dividend of $2.05 next year and $2.35

Value of Dividends and Future Price A firm is expected to pay a dividend of $2.05 next year and $2.35 the following year.  Financial analysts believe the stock will be at their price target of $110 in two years. Compute … Continue reading

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Suppose that Brown-Murphies’ common shares sell for $19.50 per share

Flotation Cost Suppose that Brown-Murphies’ common shares sell for $19.50 per share, that the firm is expected to set their next annual dividend at $0.57 per share, and that all future dividends are expected to grow by 4 percent per … Continue reading

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WhackAmOle has two million shares of common stock outstanding, 1.5 million shares

WACC Weights WhackAmOle has two million shares of common stock outstanding, 1.5 million shares of preferred stock outstanding, and 50,000 bonds. If the common shares are selling for $63 per share, the preferred shares are selling for $52 per share, … Continue reading

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