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fin 515 week 4




fin 515 week 4;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?;4.;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?;Applying the Dividend-Discount Model;5.;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?;6.;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%?;303 304;7.;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?;12.;Procter & Gamble will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. According to the dividend-discount model, what is the value of a share of Procter & Gamble stock if the firm?s equity cost of capital is 8%?;19.;Heavy Metal Corporation is expected to generate the following free cash flows over the next five years;Year;1;2;3;4;5;FCF ($ in millions);53;68;78;75;82;After then, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%;? a. Estimate the enterprise value of Heavy Metal.;? b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.;Chapter 12;1.;Suppose Pepsico?s stock has a beta of 0.57. If the risk-free rate is 3% and the expected return of the market portfolio is 8%, what is Pepsico?s equity cost of capital?;3.;Aluminum maker Alcoa has a beta of about 2.0, whereas Hormel Foods has a beta of 0.45. If the expected excess return of the marker portfolio is 5%, which of these firms has a higher equity cost of capital, and how much higher is it?;26.;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#80690 | Written in 18-Jul-2015

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