Investors require an after-tax rate of return of 10% on their stock investments. Assume that the tax rate on dividends is 30% while capital gains escape taxation. A firm will pay a $2 per share dividend 1 year from now, after which the firm's stock is expected to sell at a price of $30. Required:
a. Find the current price of the stock.
b. Find the expected before-tax rate of return for a 1-year holding period.
c. Now suppose that the dividend will be $3 per share. If the expected after-tax rate of return is still 10%, and investors still expect the stock to sell at $20 in 1 year, at what price must the stock now sell?
d. What is the before-tax of return? Why is it now higher than in part (b)?

Your parents have accumulated a $170,000 nest egg. they have been planning to use this money to pay college costs to be incurred by you and your sister, courtney. however, courtney has decided to forgo college and start a nail salon. your parents are giving courtney $20,000 to her get started, and they have decided to take year-end vacations costing $8,000 per year for the next four years. use 8 percent as the appropriate interest rate throughout this problem. use appendix a and appendix d for an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. how much money will your parents have at the end of four years to you with graduate school, which you will start then?

Bdj co. wants to issue new 22-year bonds for some much-needed expansion projects. the company currently has 9.2 percent coupon bonds on the market that sell for $1,132, make semiannual payments, have a $1,000 par value, and mature in 22 years. what coupon rate should the company set on its new bonds if it wants them to sell at par?

If the economy were in the contracting phase of the business cycle, how might that affect your ability to find work?