Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / 1) Last year Omar Industries had $900 million of sales and $450 million of fixed assets, so its FA/Sales ratio was 50%
1)
Last year Omar Industries had $900 million of sales and $450 million of fixed assets, so its FA/Sales ratio was 50%. However, its fixed assets were used at only 65% of capacity. If the company had been able to sell off enough of its fixed assets at book value, so that it was operating at full capacity, with sales held constant at $900 million, how much cash (in millions) would it have generated?
What steps are needed to arrive at the final answer?
2)
A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 12.5%, and the constant growth rate is g = 4.0%. What is the current stock price?
Select the correct answer.
a. $18.35b. $19.11c. $19.49d. $17.97e. $18.73
3)
If D1 = $1.25, g (which is constant) = 4.7%, and P0 = $24, what is the stock's expected dividend yield for the coming year?
Select the correct answer.
a. 5.73%b. 6.01%c. 6.29%d. 6.57%e. 5.45%
2)
Computation of Current Stock Price:
Current Stock Price = Next Year Dividend / (Required Rate of Return - Growth Rate)
= $1.50*(1+4%)/(12.5%-4%)
= $1.56/8.5%
Current Stock Price = $18.35
So, the correct option is A "$18.35".
3)
Computation of Expected Dividend Yield:
Expected Dividend Yield = Expected Dividend for Next Year / Current Stock Price
= $1.25*(1+4.7%)/$24
= $1.30875/$24
Expected Dividend Yield = 5.45%
