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##### Finance Misc. Multiple Problems

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solution

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Question;1.Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in one year, and its equity cost of capital is 15%. What price must you expect it to sell for right after paying the dividend in one year in order to justify its current price? 2.;Krell Industries has a share price of $22 today. If Krell is expected to pay a dividend of $0.88 this year, and its stock price is expected to grow to $23.54 at the end of the year, what is Krell?s dividend yield and equity cost of capital?" 3. NoGrowth Corporation currently pays a dividend of $2 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year?;4. Summit Systems will pay a dividend of $1.50 this year. If you expect Summit?s dividend to grow by 6% per year, what is its price per share if its equity cost of capital is 11%?;5.Dorpac Corporation has a dividend yield of 1.5%. Dorpac?s equity cost of capital is 8%, and its dividends are expected to grow at a constant rate.;a. What is the expected growth rate of Dorpac?s dividends?" b.What is the expected growth rate of Dorpac?s share price?;6. Procter & Gamble will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. According to the dividend-discount model, what is the value of a share of Procter & Gamble stock if the firm?s equity cost of capital is 8%? 7. Unida Systems has 40 million shares outstanding trading for $10 per share. In addition, Unida has $100 million in outstanding debt. Suppose Unida?s equity cost of capital is 15%, its debt cost of capital is 8%, and the corporate tax rate is 40%.;a. What is Unida?s unlevered cost of capital?" b. What is Unida?s after-tax debt cost of capital?c. What is Unida?s weighted average cost of capital?

Paper#50360 | Written in 18-Jul-2015

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