Business Finance Help for College and University Students

Finance questions

I NEED TOTALLY CONFUSSED AND DONT KNOW HOW TO DEAL WOTH IT. SO IF YOU CAN HELP ME OUT WOULD BE GREAT. 9. Break-Even. Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $30. The fixed costs incurred each year for factory upkeep and ...continues

Problems - Time value of money

1) A company plans to buy 34 jets for 120,000,000. Flight operations cost 7000000 and ground costs are 4000000 per year. The company expects to sell 300000 tickets and variable costs are expected to be 20% of revenue. With a 14% required rate of return, what annual revenue is needed to justify the purchase. Assumption is 20 year ...continues

2-stage Dividend Discount Model

Using 2-stage DDM and CAPM to value stocks: Beta of company: 1.15 Market price: $30 Intrinsic value: ? Risk-free rate 4.50% Expected market return: 14.5% EPS and dividend growth rates for first 3 years: 12% per year EPS and dividend growth rates thereafter: 9% per year Estimate the intrinsic value oif the compa ...continues

Evaluation of a company: three-stage dividend growth model with declining growth

I am evaluating a firm using the three-stage dividend growth model with a linearly declining growth rate in Stage 2. I am using the following information (as of the start of 2004): * Current dividend is $0.39 * I estimate the required rate of return on the stock at 8.72% * In stage 1, the dividend will grow at 11.3 percent ...continues

dividend growth models

What is an inherent weakness of all dividend growth models?

What is the value of one ordinary share of the company?

I am evaluating a company. It is considered to be 2002, and this time, the company & the whole industry is considered unprofitable. The company doesn't pay dividends on its common shares. I have decided to value the company using my forcasts of FCFE and assume: * The company has 17 billion outstanding shares * Sales will ...continues

Intrinsic value vs. Market Price

Company A has a market price of $45.00 and an intrinsic value of $63.00 Company B has a market price of $30.00 and an intrinsic value of $16.00 Would you recommend A or B stock for purchase by comparing each company's intrinsic value with its current market price?

Unlevered Beta

Using 5 years of monthly returns, I have estimated the historical equity beta of a company to be 1. During this span of time, the company's debt structure was stable, with the total debt-to-total asset ratio averaging .40 & the company's tax rate was 46%. Estimate the historical unlevered beta.

Estimate the expected returns

A magazine gave the following estimates for a firm: Beta= 1.15 Dividend per share at date zero= $3.10 Expected Dividend per share in three years from zero= $4.10 Retention rate in three years from zero= 60% ROE in three years from zero= 15% The stock was selling for $49. Estimate the expected returns from purc ...continues

lease or buy problem

1. Lease or Buy. Your company wants to purchase a new network file server for its wide-area computer network. The server costs $75,000. It will be completely obsolete in three years. Your options are to borrow the money at 10 percent or to lease the machine. If you lease, the payments will be $27,000 per year, payable at the ...continues