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Shelby Inc. are expected to grow at 7% per year in the future. Shelby?s common stock sells for $23 per share,

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Question;The earnings, dividends, and stock price of Shelby Inc. are;expected to grow at 7% per year in the future. Shelby?s common stock sells for;$23 per share, its last dividend was;$2.00, and the company will pay a dividend of $2.14 at the;end of the current year.;a. Using the discounted cash flow approach, what is its cost;of equity?;b. If the firm?s beta is 1.6, the risk-free rate is 9%, and;the expected return on the market is 13%, then what would be the firm?s cost of;equity based on the CAPM approach?;(10-1) A project has an initial cost of $40,000, expected;net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%.;What is the project?s NPV? (Hint: Begin by constructing a time line.);(10-2) Refer to Problem 10-1. What is the project?s IRR?;(10-3) Refer to Problem 10-1. What is the project?s MIRR?;(10-4) Refer to Problem 10-1. What is the project?s PI?;(10-5) Refer to Problem 10-1. What is the project?s payback;period?;(10-6) Refer to Problem 10-1. What is the project?s;discounted payback period?;(10-7) your division is considering two investment projects;each of which requires an up-front expenditure of $15 million. You estimate;that the investments will produce the following net cash flows;a. What are the two projects? net present values, assuming;the cost of capital is 5%?;10%? 15%?;b. What are the two projects? IRRs at these same costs of;capital? Year Project A Project B;1 $;5,000,000 $20,000,000;2;10,000,000 10,000,000;3;20,000,000 6,000,000;(25-2) An analyst has modeled the stock of Crisp Trucking;using a two-factor APT model. The risk-free rate is 6%, the expected return on;the first factor (r1) is 12%, and the expected return on the second factor (r2);is 8%. If bi1= 0.7 and bi2 = 0.9, what is Crisp?s required return?;(5-2) Wilson Wonders? bonds have 12 years remaining to;maturity. Interest is paid annually, the bonds have a $1,000 par value, and the;coupon interest rate is 10%. The bonds sell at a price of $850. What is their;yield to maturity?

 

Paper#43976 | Written in 18-Jul-2015

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