26) A 1-year gold futures contract is selling for $1,645. Spot gold prices are $1,592 and the 1-year risk-free rate is 3%. Based on the above data, which of the following set of transactions will yield positive riskless arbitrage profits?
a. Buy gold in the spot with borrowed money, and sell the futures contract.
b. Buy the futures contract, and buy the gold spot using borrowed money.
c. Buy gold spot with borrowed money, and buy the futures contract.
d. Buy the futures contract, and sell the gold spot and invest the money earned.
44) The market capitalization rate for Admiral Motors Company is 7%. Its expected ROE is 10% and its expected EPS is $5. If the firmâs plowback ratio is 60%.
a. Calculate the growth rate. (Input your answer as a nearest whole percent.)
Growth rate %
b. what will be its P/E ratio? (Do not round intermediate calculations.)
P/E ratio
49) Next year's earnings are estimated to be $3. The company plans to reinvest 20% of its earnings at 15%. If the cost of equity is 7%, what is the present value of growth opportunities?
a. $18.14 b. $16.14 c. $17.14 d. $7.07
37) Miltmar Corporation will pay a year-end dividend of $5, and dividends thereafter are expected to grow at the constant rate of 5% per year. The risk-free rate is 6%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.75.
a. Calculate the market capitalization rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Market capitalization rate %
b. What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Intrinsic value $
26) A 1-year gold futures contract is selling for $1,645. Spot gold prices are $1,592 and the 1-year risk-free rate is 3%. Based on the above data, which of the following set of transactions will yield positive riskless arbitrage profits?
a. Buy gold in the spot with borrowed money, and sell the futures contract.
b. Buy the futures contract, and buy the gold spot using borrowed money.
c. Buy gold spot with borrowed money, and buy the futures contract.
d. Buy the futures contract, and sell the gold spot and invest the money earned.
44) The market capitalization rate for Admiral Motors Company is 7%. Its expected ROE is 10% and its expected EPS is $5. If the firmâs plowback ratio is 60%.
| a. | Calculate the growth rate. (Input your answer as a nearest whole percent.) |
| Growth rate | % |
| b. | what will be its P/E ratio? (Do not round intermediate calculations.) |
| P/E ratio |
| 49) Next year's earnings are estimated to be $3. The company plans to reinvest 20% of its earnings at 15%. If the cost of equity is 7%, what is the present value of growth opportunities? |
a. $18.14 b. $16.14 c. $17.14 d. $7.07
37) Miltmar Corporation will pay a year-end dividend of $5, and dividends thereafter are expected to grow at the constant rate of 5% per year. The risk-free rate is 6%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.75.
| a. | Calculate the market capitalization rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Market capitalization rate | % |
| b. | What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Intrinsic value | $ |
Related questions
Even Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 15%, and it will maintain a plowback ratio of 0.40. Its projected earnings are $3 per share. Investors expect a 11% rate of return on the stock.
a. At what price and P/E ratio would you expect the firm to sell? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| Price | $ |
| P/E ratio | |
b. What is the present value of growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
PVGO $
c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 20% of its earnings? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| P/E ratio | |
| PVGO | $ |
