dividends at roughly 5% per year. This analysis assumes that the leverage ratio of the company does not change‚ so that the return on equity remains constant. We believe that the likely dividend cut would be in the region of 20%. Such a cut implies a payout ratio of 72%‚ putting FPL below the industry average. The implied growth rate of 4.64% seems achievable. During the period from 1984 to 1989 inclusive‚
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13. Relative Valuation - Using Market Comparables Zenu Sharma zenu.sharma@edhec.edu Course Road Map 1. Financial Markets and Management 2. Present Value 3. Introduction to Risk and Return 4. Portfolio Selection 5. The Capital Asset Pricing Model 6. Financing and Capital Structure 7. Interest Rates and the Valuation of Bonds 8. Project Appraisal 9. Capital Budgeting 10. Capital Budgeting with Financial Leverage 11. The Valuation of Companies and Stocks 12. Relative Valuation 13. Options and
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000 May $12‚000 February 16‚000 June 20‚000 March 18‚000 July 22‚000 April 24‚000 Schedule of cash payments (LO2) Monthly material purchases are set equal to 20 percent of forecasted sales for the next month. Of the total material costs‚ 40 percent are paid in the month of purchase and 60 percent in the following month. Labor costs will run $6‚000 per month‚ and fixed overhead is $3‚000 per month. Interest payments on the debt will be $4‚500 for both March and June. Finally‚ Elliot’s salesforce
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LECTURE 10 COST OF CAPITAL CLASS QUESTIONS 1. Roland Corporation’s last dividend (D0)‚ which was paid yesterday‚ was $2.50. The firm has a constant growth of 18.8%. The firm’s beta coefficient is 1.2. The required return on an average stock in the market is 13 percent‚ and the risk-free rate is 7 percent. Roland’s A-rated bonds are yielding 10 percent‚ its risk premium is 4% and its current stock price is $30. Which of the following values is the most reasonable estimate of Roland’s cost of
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EIC Analysis Economy There are many things that may happen in the world that could affect the stock market as a whole‚ as well as individual stocks. The stock market reacts well to things such as low inflation‚ increasing Gross National Product (GNP)‚ and other positive news in the economy. The market does not react well to signs that inflation is on the rise or unemployment rising. Today¡¯s inflation rate is on the rise due to hurricane Katrina and high gas prices. ¡°Consumer prices rose
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Tootsie Roll Industries Loan Package Tootsie Roll Industries is one of America’s most recognized confectionary companies and has been in business for more than 111 years‚ manufacturing and selling some of the most popular candies in the world. Tootsie Roll wants to secure a loan that will help increase the company’s total liabilities by 10% in the tune of $2.5 million. This loan package is attached to an updated business plan that provides the lender with the company’s history‚ a vision statement
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no preferred stock. What caused the decrease? A. Equity decreased by 10 percent. B. Equity decreased by 50 percent. C. Equity increased by 50 percent. D. Equity increased by 10 percent. QUESTION 3 A corporation’s dividend payout ratio is the percentage of _____ paid out as dividends. A. earnings B. earnings before interest and taxes C. retained earnings D. cash QUESTION 4 According to pecking-order theory‚ managers will often choose to finance with:
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| Apple’s Payout Policy Table of Content 1. Executive Summary ------------------------------------------------------- 3 2. Introduction ------------------------------------------------------- 4 3. Apple’s previous payout policy and financial strategy ------------------ 5 4. Apple’s current payout policy -------------------------------------------- 5 5. Comparisons against
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Merrill Lynch’s utility analyst downgraded FPL Group Inc. Kate Stark‚ utility analyst at First Securities Corporation‚ wondered whether she should issue an updated report about stocks of FPL. We investigated the potential risks faced by FPL and its payout policies‚ and according to the results‚ we recommend the shareholders to hold FPL’s stocks. Based on our analysis‚ there are several important issues confronting the FPL Group in May 1994. The first one is the potential competitors and losses resulting
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COCA COLA VS.PEPSICO 1. Current Ratio Liquidity Measurement Ratio | Coca Cola | PepsiCo | Current Ratio | 1.13 | 1.44 | The current ratio measures the company’s ability to pay its short term obligations with its short term assets. Between Coca Cola and PepsiCo‚ PepsiCo has a higher current ratio implying that the latter is more capable of paying its obligations. The debt management policies of Coca Cola in conjunction with share repurchase program and investment activity resulted in current
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