Start-Up Industries is a new firm that has raised $400 million by selling shares of stock Management plans to earn a 20% rate of returnon equity, which is more than the 12% rate of return available on comparable-risk investments. Half of all earnings will be reinvested inthe firm.B. What will be Start-Up's ratio of market value to book value?Note: Do not round intermediate calculations.Market-to-book ratiob. What will be Start-Up's ratio of market value to book value if the firm can earn only a rate of return of 8% on its investments?Note: Do not round intermediate calculations. Round your answer to 1 decimal place.Market-to-book ratio

Raised amount (Book value)$400 millionReturn on equity20%Cost of equity12%Retention ratio50%

Answered: Start-Up Industries is a new firm that…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Start - Up Industries is a new firm that has raised $210 million by selling shares of stock. Management plans to earn a 20% rate of return on equity, which is more than the 15% rate of return available on comparable - risk investments. Half of all earnings will be reinvested in the firm. What will be Start - Up's ratio of market value to book value? Note: Do not round intermediate calculations. What will be Start - Up's ratio of market value to book value if the firm can earn only a rate of return of 10% on its investments? Note: Do not round intermediate calculations. Round your answer to 1 decimal place.
I need help with questions a-d
Please correct answer and don't use hand rating
GPS Inc. wishes to estimate its cost of retained earnings. The firm's beta is 1.21. The rate on 6-month T-bills is 0.036, and the return on the market portfolio index is 0.119. What is the appropriate cost for retained earnings in determining the firm's cost of capital? Instruction: Type your answer as a decimal, and round to three decimal places.
Calculate the questions given by using formula (NOT excel)
Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm's cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of equity % b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.) Cost of equity % c. Which of the two estimates is more reasonable?
Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 38.5%, and the current dividend yield is 10.50%. Its beta is 1.37, the market risk premium is 16.50%, and the risk-free rate is 2.30%. a. Use the CAPM to estimate the firm’s cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.5%, and the current dividend yield is 8.50%. Its beta is 1.33, the market risk premium is 14.50%, and the risk-free rate is 2.70%. a. Use the CAPM to estimate the firm's cost of equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. Now use the constant growth model to estimate the cost of equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent. c. Which of the two estimates is more reasonable? a. Cost of equity % % c. Which of the two estimates is more reasonable? b. Cost of equity
Suppose instead that the company is about to pay a dividend of $2.00 per share. You also learn that the company is expected to have net income of $100 million, dividends of $50 million, and total equity of $1.5 billion (and that these relationships are expected to be stable). If the relevant required rate of return is 10%, what is the intrinsic value per share of the company’s stock?
Can you answer this accounting question without use ai?
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and gL = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings? Group of answer choices 12.94% 11.68% 12.30% 13.59% 11.10%
Assume that you are a consultant to Broske Inc., and you have been provided with the following data: the next expected dividend is $0.67; the current market price is $42.50 and the constant growth rate for the dividends is 8.00% Based on the information given what is the cost of equity?

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