Question

of $2,500, and a profit margin of 5 percent. 1. Braam Fire The firm has "Fire Prevention Corp, has sales of $3,000, total assets of $2,500 has a total debt ratio of 40 percent. What is the return on equity? A. 2.4 percent B. 8.4 percent C. 10 percent D. 12 percent E. 15 percent 54 dividends per share next year. The market requires a dividends grow at a constant rate of 6% 2. The Blue Moor 16% return on per year, A. 40 B. 42.40 C. 44.94 D. 47.64 E. 50.50 Moon Corporation is expected to pay $4 dividends per share next year. T um on the firm's stock. If the Blue Moon Corporation's dividends grow atac will be its stock price in 4 years. 3. A preferred su red stock is expected to pay dividend of $5 per year forever. Given a required rate of return of is the current value of the preferred stock? 10%, what is the A. $5 B. $50 C. $100 D. $500 E. $1,000,000 4. Teder Corporatio 12 percent reti corporation stock is expected to pay $3.51 dividends per share next year. The market requires : cent return on the firm's stock. If the company maintains a constant 7 percent growth rate in ds, Teder Corporation stock currently sells for per share. A. $59.9 B. $64.1 C. $68.6 D. $70.2 E. $75.1 5. Andre's Bakery has sales of $687,000 with costs of S492,000. Interest expense is $26,000 and depreciation is $42,000. Dividend paid out is $20,000. The tax rate is 35 percent. What is the net income?

Answer 1

Hi

As per HOMEWORKLIB RULES, one is supposed to answer ony first question if nothing specific is mentioned. I will try to solve as many as i can.

Answer 1 -

Sales = $3,000

Profit Margin = 5%

Profit = $3,000 * 5% = $150

Total Assets = $2,500

Total Debt Ratio = 0.4

Equity = $2,500 * (1-Debt) = $2,500 * (1-.04) = $1,500

Return on Equity = $150 / $1,500 = 10%  

Answer 2 -

D1 = $4

Growth = 6%

D5 = D1 * ( 1+g)^4

D5 = 4 * (1+6%)^4 or $4 x 1.06 x 1.06 x 1.06 x 1.06

D5 = $5.05

P4 = D5 / ke - g

P4 = 5.05 / ( 16 -6 )%

P4 = $50.50

Answer 3 -

Dividend = $5

Rate of return = 10%

Value of preferred stock = Dividend / Rate of return

= $5 / 10%

= $50

Answer 4 -

D1 = $3.51

Ke = 12%

g = 7%

P0 = D1 / (ke - g)

P0 = 3.51 / (12% - 7%)

P0 = $70.20

Answer 5 -

Net income = $82,550

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