10. The MacBurger Company, a chain of fast-food restaurants, expects to earn $200 million after taxes...
10. The MacBurger Company, a chain of fast-food restaurants, expects to earn $200 million after taxes for the current year. The company has a policy of paying out half of its net after-tax income to the holders of the company’s 100 million shares of common stock. A share of the common stock of the company currently sells for eight times current earnings. Management and outside analysts expect the growth rate of earnings and dividends for the company to be 7.5 percent per year. Calculate the cost of equity capital to this firm.
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10. The MacBurger Company, a chain of fast-food restaurants,
expects to earn $200 million after taxes...
The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all...
The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all their restaurants. This is expected to increase cash flows by $11 million per year for the next five years. If the discount rate is 5.8%, were the owners correct in making the decision to install donut makers? A. No, as it has a net present value (NPV) of $4 million. B. Yes, as it has a net present value (NPV) of $22 million. C....
The owners of a chain of fast-food restaurants spend $29 million installing donut makers in all...
The owners of a chain of fast-food restaurants spend $29 million installing donut makers in all their restaurants. This is expected to increase cash flows by $11 million per year for the next five years. If the discount rate is 7%, were the owners correct in making the decision to install donut makers? A. No, as it has a net present value (NPV) of - $3 million. B. Yes, as it has a net present value (NPV) of $16 million....
Rachael's Restaurant, a fast-food restaurant company, operates a chain of restaurants across the nation. Each restaurant...
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Berlington Inc. expects to earn $18 million per year in perpetuity if it does not undertake any new projects. The firm has an opportunity to invest $10 million today and $10 million in one year in a new project. The new investment will generate annual earnings of $7.5 million in perpetuity, beginning two years from today. The firm has 10 million shares of common stock outstanding, and the required rate of return on the stock is 12 percent. a) What...
Rohr Inc.’s common stock currently sells for $64.00 per share, the company expects to earn $7.80...
Rohr Inc.’s common stock currently sells for $64.00 per share, the company expects to earn $7.80 per share next year, its expected payout ratio is 55%, and its expected constant growth rate is 4.30%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. By how much would the cost of new stock exceed the cost of retained earnings?
Madden Inc.'s common stock currently sells for $15.00 per share, the company expects to earn $2.75...
Madden Inc.'s common stock currently sells for $15.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected growth rate is 6%. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of new stock exceed the cost of retained earnings? A) 78% B) 1.12% C).67% D) 1.45% E) 89%
Eakins Inc.’s common stock currently sells for $53.00 per share, the company expects to earn $3.80...
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DISNEY’S NUMBERS Use the following information on Disney to answer the case questions. Disney’s current stock...
DISNEY’S NUMBERS Use the following information on Disney to answer the case questions. Disney’s current stock price is $113.00 per share. The average growth rate of the company’s dividend has been 16.09% from 2002 through 2017. Disney’s return on equity is 19.5% and the company retains approximately 75.7% of its profits while paying out the remaining 24.3% in dividends. The company’s stock currently trades at 16.27 times its current year earnings estimate of $6.96 per share. Analysts expect the company...
What is Disney stock’s intrinsic value using multi stage growth model?
Use the following information on Disney to answer the case questions.◼ Disney’s current stock price is $140.00 per share. The average growth rate of the company’s dividend has been 17.7% from 2004 through 2018◼ Disney’s return on equity is 28.0% and the company retains approximately 80.0% of its profits while paying out the remaining 20.0% in dividends.◼ The company’s stock currently trades at 21.21 times its current year earnings estimate of $6.60 per share.◼ Analysts expect the company to earn...
In the spring of 2016, the CFO of HTPL Distributing Company decided to distribute a stock...
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The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all their restaurants. This is expected to increase cash flows by $11 million per year for the next five years. If the discount rate is 5.8%, were the owners correct in making the decision to install donut makers? A. No, as it has a net present value (NPV) of $4 million. B. Yes, as it has a net present value (NPV) of $22 million. C....
The owners of a chain of fast-food restaurants spend $29 million installing donut makers in all their restaurants. This is expected to increase cash flows by $11 million per year for the next five years. If the discount rate is 7%, were the owners correct in making the decision to install donut makers? A. No, as it has a net present value (NPV) of - $3 million. B. Yes, as it has a net present value (NPV) of $16 million....
Rachael's Restaurant, a fast-food restaurant company, operates a chain of restaurants across the nation. Each restaurant employs eight people; one is a manager paid a salary plus a bonus equal to 4 percent of sales. Other employees, two cooks, one dishwasher, and four servers, are paid salaries. Each manager is budgeted $3,000 per month for advertising costs. Required Classify each of the following costs incurred by Rachael's Restaurant as fixed, variable, or mixed: a. Advertising costs relative to the number...
Madden Inc.'s common stock currently sells for $15.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected growth rate is 6%. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of new stock exceed the cost of retained earnings? A) 78% B) 1.12% C).67% D) 1.45% E) 89%
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