on capital of 9.21% was nearly 20% higher than the 2nd ranked firm. Annual return on equity averaged 89% and return on assets averaged 48%. Over the same period, UST also provided a generous return on capital to investors paying $2.2 billion in dividends and repurchasing $2.0 billion in stock. However, UST also faces challenges associated with the industry in which it operates. The tobacco industry faces significant legal; however, the smokeless tobacco industry is traditionally a less litigious
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and revenue recognition practices may be symptoms of a similar problem reoccurring in the future, even if this loan is granted. Analysis of the Case • Assumption: Hampton is a resilient machine tool manufacturer which owns majority of the market share in its industry compared to competitors, currently operates in a recovering to thriving economy and also enjoys the business of pretty stable, trustworthy clients who are mainly in the automobile and defense industry in the St. Louis area. Judging
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Part A: PROBLEM-SOLVING QUESTIONS (Answer all FOUR questions). This assignment is 20% of the total mark. 1. Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1034.74. (10 Marks) a. What is the bond’s yield to maturity (expressed as an APR with semiannual compounding)? CPN = PMT = $40 = 1000/2*0.08 P = $1034, 74 N = 20 FV = $1000 Using Therefore y = 3,75 And APR = 7.5% b. If the bond’s yield to maturity changes to 9% APR
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no other liabilities. Assume perfect capital markets. a. Suppose Baruk has 10 million shares outstanding. What is Baruk’s current share price? Assets – debt / shares 81-36/10 = 4.5 $4.50 per share b. How many new shares must Baruk issue to raise the capital needed to pay its debt obligation? Debt / share price 36/4.5 = 8 million shares c. After repaying the debt, what will Baruk’s share price be? Share price would still be the same $4.50 7. You have received two job offers. Firm A offers
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| |c. |Minimize the chances of losses. | |d. |Maximize the stock price per share. | |e. |Maximize expected net income. | 2. Which of the following
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Marriott Corporation The idea of repurchasing shares was no stranger to Bill Marriott by January 1980. Almost five million shares of common stock had been repurchased on the open market by Marriott Corporation during 1979 at a total cost of $74 million and an average price of $15.16 in the belief that they were undervalued—a belief that still was not fully reflected in the market price. At $19 5/8, the stock was selling at only six times cash flow per share; and its price/earnings ratio of nine was
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million What is the value of NetOne's equity with leverage? E = VL - D = VU + PV(ITS) - D = VU + TC D - D = VU + D(TC - 1)= $33.333 + $19.05(0.35 - 1) = $20.951 million. Example: A firm has $50 million in equity and $20 million of debt, it pays a dividend of $3 million, and has a net income of $10 million. ROA = Net Income / Beginning Assets ROE= Net Income / Beginning Equity Old Retention Rate = (1-payout policy) New Retention Rate= (1-New Payout Percent) What is the firm's sustainable growth rate
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good ROE, ROA and gross profit margin. Except decrease in earnings and cash flow in 1997, UST kept increasing in sales (10-year compound annual growth rate of 9%), Net income (11%) and Free operating cash flow (12%). UST also kept an upward trend in dividend paid (from $81.7 to $301.1). Except in 1997, UST kept repurchased the stock, which partly lead to an increasing in stock price during 10 years. So, over the years UST's operating and financing performance were amazing. Is this performance expected
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the market continues to show signs of improvement. The company has shown steady growth in the last year and revenues are estimated to increase 19% over FY 2002. Based on this estimate, FY 2003 net income will hit $222.7 million ($0.71 earnings per share); a 12.6% growth from the previous year. Operating cash flow; while lower than 2000 and 2001 has shown a modest increase since 2002 and continues to be positive due to the company’s variable cost structure. This is in-part is due to more efficient
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| |c. |Minimize the chances of losses. | |d. |Maximize the stock price per share. | |e. |Maximize expected net income. | 2. Which of the following
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