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##### Do all calculations using 9 decimal places, retain the 9 decimal places throughout the

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Do all calculations using 9 decimal places, retain the 9 decimal places throughout the;calculations, then when you report answers round to 2 decimal places. Examples: If the;answer is in years, i.e. 9.55769321 report 9.56. If the answer is in dollars. i.e.;$56,987.55555 report to the nearest cent 56,987.56. If the answer is in percent terms;i.e..104478324, then report 10.45. You need to be very precise with rounding and;reporting.;1. A common stock pays an annual dividend per share of $3.10. The risk-free rate is;7% and the risk premium for this stock is 4%. If the annual dividend is expected;to remain at $3.10, what is the value of the stock?;$;(10 points);2. Computer stocks currently provide an expected rate of return of 14%. MBI, a large;computer company, will pay a year-end dividend of $2 per share.;2a. If the stock is selling at $40 per share, what must be the markets expectation of the;growth rate of MBI dividends?;%;(7 points);2b. If dividend growth forecasts for MBI are revised downward to 5% per year, what will;the new price of MBI stock be?;$;(7 points);3. MF Corporation has an ROE of 16% and a plowback ratio of 60%. The coming years;earnings are expected to be $2 per share, and the market capitalization rate is 13%.;3a.Calculate MFs current stock price;$;(7 points);3b. Calculate MFs stock price in three years;$;(8 points);4. The market consensus is that Analog Electronic Corporation has an ROE = 15% and a;beta of 1.25. It plans to maintain indefinitely its traditional plowback ratio of 70%. This;past years earnings were $6 per share. The annual dividend was just paid. The;consensus estimate of the coming years market return is 12%, and T-bills currently offer;a 6% return.;4a. Calculate the price at which Analog stock should sell;$;(7 points);4b. Calculate Analogs PE ratio;(7 points);4c. Calculate the present value of growth opportunities;$;(7 points);4d. Assume that Analog reduces its plowback ratio to 40%. Calculate the new price for;Analog;$;(8 points);5. The FI Corporations dividends per share are expected to grow indefinitely by 5% per;year.;5a. If this years year-end dividend is $6 and the market capitalization rate is 10% per;year, what must the current stock price be according to the DDM?;$;(8 points);5b. If the expected earnings per share are $10, what is the implied value of the ROE?;%;(7 points);5c. What is the present value of the growth opportunities?;$;(7 points);6. The risk free rate of return is 6%, the required rate of return on the market is 12%, and;High Flyer stock has a beta coefficient of 1.5. If the dividend per share expected during;the coming year, D1, is $2.50 and g = 5%, at what price should a share sell?;$;(10 points);View Full Attachment

Paper#30347 | Written in 18-Jul-2015

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