company earnings‚ payout ratio‚ growth rate and cost of equity. From the dividend discount model we know that P0=EPS0×Payout ratio×(1+gn)r-gn ‚ thus P0EPS0=PE ratio=Payout ratio×(1+gn)r-gn. Thus we see that the PE ratio is an increasing function of the payout ratio and the growth rate and a decreasing function of the riskiness of the firm. The determinants of PBV ratio can also be explored by using the dividend discount model. We know thatP0=DPS1ke-gn‚ substituting for DPS1 =EPS1(payout ratio)‚ the
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Calculation Discursive 20% 80% Question 2 Dividend Valuation Model 45% 55% Question 3 Option strategies Straddles 80% 20% Question 4 Duration and convexity –Price – yield relationship 30% 70% Question 5 Option and Futures -mixed N/A 100% Question 6 CAPM 40% 60% Dividend Discount Models 1. The intrinsic value‚ denoted V0‚ of a share of stock is defined as the present value of all cash payments to the investor in the stock‚ including dividends as well as the proceeds from the ultimate sale of the stock
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Spring 2010 Ameritrade - Harvard Case Study Background: Ameritrade Holding Corporation is securities brokerage services and technology-based financial services firm from the United States. The company was founded in 1971 and is headquartered in Omaha‚ Nebraska. “Ameritrade MERITRADE for self-directed retail investors; TD AMERITRADE Institutional that provides brokerage and custody services; trading platforms that enables research and analysis; a suite of education
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FIN 201 SOLUTION SET – UNIT TWO CHAPTER 3 3‐2 Liquidity Ratios The top part of Ramakrishnan‚ Inc‚’s 2012 and 2011 balance sheets is listed below (in millions of dollars). Current assets: 2012 2011 Current liabilities: Cash and marketable securities Accrued wages and $ 34 $ 25 taxes 2012 2011 $ 32 $ 31 Accounts receivable 143 128 Accounts payable Inventory 206 187
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Retirement System (Calpers)‚ which has 6.5 million shares‚ have already said they will vote against the plan. Ford has about 1.2 billion shares outstanding. Both claim the company’s Value Enhancement Plan (VEP) allows the Ford family to retain its 40 percent voting share in the company‚ while decreasing its overall ownership in the company or just the opposite: To increase its ownership in the company without having to make any real investment in it. "We are disappointed that the board of directors
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increase profit. Companies need to be aware of the financial needs of the company whether it means to offer dividends or reinvest money back into company for growth. Finally there is liquidity factor should be considered to see if the company is able to payout the actual cash dividends. Sometimes companies have good earnings but are unable to carry out the cash to account for the
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follows the residual dividend policy‚ then a sudden increase in the number of profitable projects is likely to reduce the firm’s dividend payout. Large investment opportunities coupled with low funds will have a low dividend payout. 5. DeAngelo Corp.’s projected net income is $150.0 million‚ its target capital structure is 25% debt and 75% equity‚ and its target payout ratio is 65%. DeAngelo has more positive NPV projects than it can finance without issuing new stock‚ but its board of directors had decreed
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Chapter 03 - Financial Statements Analysis and Long-Term Planning Chapter 03 Financial Statements Analysis and Long-Term Planning Multiple Choice Questions 1. One key reason a long-term financial plan is developed is because: A. the plan determines your financial policy. B. the plan determines your investment policy. C. there are direct connections between achievable corporate growth and the financial policy. D. there is unlimited growth possible in a well-developed financial plan. E. None of the
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inconsistent with the view that the managerial ownership and institutional ownership reduce the need for the dividend mechanism. Finally‚ there is evidence that the Keiretsu classification affects relations between ownership structure and dividend payouts. Overall‚ the dividend policy appears to be used by Japanese low-growth firms to control the overinvestment problem. Free cash flow hypothesis is to some degree supported. JEL classification codes: G32 G34 G35 Keywords: Ownership Structure
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HelloALLLLL Monday‚ March 28‚ 2011 HelloAll (15-1) Net working capital F S Answer: b EASY 1. Net working capital‚ defined as current assets minus the sum of payables and accruals‚ is equal to the current ratio minus the quick ratio. a. True b. False (15-1) Net working capital F S Answer: b EASY 2. Net working capital is defined as current assets divided by current liabilities. a. True b. False (15-1) Working capital F S Answer: b EASY 3. An increase in any current asset must be
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