Question: 1. Brave Enterprises is issuing stock in order to raise money for a new expansion into the manufacturing side of their business.
a. If the required rate of return for a company of their risk level is 17% and their expected growth rate is 4%. What is their stock price given their expected dividend of $0.26?
b. How many shares should they issue in order to raise $30,000,000 in capital? Draw a normal and inverted yield curve (be sure to label your axes). Also explain what a yield curve represents.
2. Janeswarm Inc. reports the following account balances: inventory of $17, 600, COGS of $128, 300, accounts payable of $24, 700, cash of $11, 900, current liabilities of $43,000, and net income of $31, 900. How long is inventory generally on the shelf? Would this be a reasonable amount of time if they bake cakes?