The attach assignment contains how Questions 3 and 9 actually look. 1. Stock Values. Metroplex Corporation will pay a $3.04 per share dividend next year. The company pledges to increase its dividend by 3.8 percent per year indefinitely. If you require an 11 percent return on your investment, how much will you pay for the company's stock today? 2. Stock Valuation. Suppose you know that a company's stock currently sells for $47 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? 3. Calculating Payback. What is the payback period for the following set of cash flows? Year Cash Flow 0 -$6,400 1 1,600 2 1,900 3 2,300 4 1,400 4. Calculating Payback. An investment project provides cash inflows of $765 per year for eight years. What is the project payback period if the initial cost is $2,400? What if the initial cost is $3,600? What if it is $6,500? 5. Calculating NPV and IRR. A project that provides annual cash flows of $28,500 for nine years costs $138,000 today. Is this a good project if the required return is 8 percent? What if it's 20 percent? At what discount rate would you be indifferent between accepting the project and rejecting it? 6. Cost-Cutting Proposals. Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $560,000 is estimated to result in $210,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $80,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $3,000 in inventory for each succeeding year of the project. If the shop's tax rate is 35 percent and its discount rate is 9 percent, should the company buy and install the machine press? 7. Calculating Returns. Suppose a stock had an initial price of $91 per share, paid a dividend of $2.40 per share during the year, and had an ending share price of $102. Compute the percentage total return. 8. Calculating Yields. In Problem 1, what was the dividend yield? The capital gains yield? 9. Calculating Returns and Standard Deviations. Based on the following information, calculate the expected return and standard deviation for the two stocks: Rate of Return if State occurs State of Probability of Stock A Stock B Economy State of Economy Recession .15 .05 -.17 Normal .65 .08 .12 Boom .20 .13 .29 10. Calculating Cost of Equity. The Down and Out Co. just issued a dividend of $2.40 per share on its common stock. The company is expected to maintain a constant 5.5 percent growth rate in its dividends indefinitely. If the stock sells for $52 a share, what is the company's cost of equity? 11. Calculating WACC. Mullineaux Corporation has a target capital structure of 60 percent common stock, 5 percent preferred stock, and 35 percent debt. Its cost of equity is 14 percent, the cost of preferred stock is 6 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent. a. What is Mullineaux's WACC?
Paper#5347 | Written in 18-Jul-2015Price : $25