Fin 515 Week 4 Homework Assignment

basketball team 515 WEEK 4 HOMEWORK grant (72) Constant emersion Valuation Boehm co-ordinated is anticipate to pay a $1. 50 per conduct dividend at the end of this category (i. e. , D1 = $1. 50). The dividend is judge to grow at a uninterrupted wander of 7% a category. The required set up of return on the pipeline, rs, is 15%. What is the value per sh atomic number 18 of Boehms product line? For this difficulty we can enjoyment the formula from the discussion P=d1(R-G) to relegate the price. We just claim to mess in the set so, 1. 5/(8% 15-7). The value is 18. 75. (74) favourite(a) Stock ValuationNicks Enchiladas Incorpo wanderd has pet depot bystanding that pays a dividend of $5 at the end of severally year. The favorite(a) sells for $50 a sh ar. What is the stocks required rate of return? From the book we discover that we simply drive to fasten into the formula, r=5/50. The required rate of return should be 10 percent. (75) Nonconstant Growth Valuation A follow presently pays a dividend of $2 per share (D0 = $2). It is estimated that the companys dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The companys stock has a beta of 1. , the risk-free rate is 7. 5%, and the mart risk pension is 4%. What is your estimate of the stocks up-to-the-minute price? I wasting diseased the financial calculator online for this problem, but we can bechance it manually To solve this problem we need to first describe the required rate of return, which is Rs=Rf+B(Rrm-Rrf), so 7. 5+(11. 5-7. 5)*1. 2=12. 3 So, D0 would be 2, D1 would be 2. 4, D2 would be 2. 88, and D3 would be 3. 08. We then have to calculate the PV for the dividends, which is 4. 42. We have to calculate P2, which came out to 46. 10. afterward adding up the PV values we protrude the stocks price which is 50. 0, or at least thats what I got (9-1) After-Tax court of Debt Calculate the after-tax live of debt under eac h of the following conditions a. touch on rate of 13%, tax rate of 0% To calculate, share 0. 13*(1-0), we get 13 percent. b. Interest rate of 13%, tax rate of 20% To calculate, top 0. 13*(1-0. 20), we get 10. 4 percent. c. Interest rate of 13%, tax rate of 35% To calculate, take 0. 13*(1-0. 35), we get 8. 45 percent. (9-4) follow of preferent Stock with Flotation be Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $70.Burnwood moldiness pay flotation costs of 5% of the issue price. What is the cost of the preferred stock? Were given the par value, the divident percentage, the market value of the stock, and the flotation costs, and are spirit for the cost. The ADP of the preferred stock is 6 percent*60, which comes out to 3. 60. The cost of favorite(a) Stock can be mensural as (Preferred stock dividend/MP of Preferred Stock*(1-FC) We just need to plug in the numbers, so you get essentially (60*. 06)/7 0*(1-0. 05) calculating that out, the cost of preferred stock should be 5. 1 percent. (9-5) constitute of Equity DCF Summerdahl Resorts popular stock is currently trading at $36 a share. The stock is expected to pay a dividend of $3. 00 a share at the end of the year (D1 = $3. 00), and the dividend is expected to grow at a constant rate of 5% a year. What is its cost of habitual equity? For this problem, we are to use the equation r=(D1/P0)+g Since we are given the P0, D1, and G (36,3,0. 05) we are sounding for r so, just plug-and-chug. Comes out to 13. 3 percent. (9-6) Cost of Equity CAPM Booher Book Stores has a beta of 0. 8.The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 6%. The market risk premium is 5. 5%, and the return on an modal(a) stock in the market put out year was 15%. What is the estimated cost of common equity using the CAPM? For this one, looked to me like we need to use the formula Rs=Rrf+Bi(RPm) Like the give way problem, we are give n all the values except one. Plugging-and-chugging again, I got 0. 06+0. 8*(0. 055), came out to 10. 4 percent. (9-7) WACC Shi Importers balance tabloid shows $300 one million million in debt, $50 million in preferred stock, and $250 million in total common equity.Shis tax rate is 40%, rd = 6%, rps = 5. 8%, and rs = 12%. If Shi has a backside capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? So, for this problem we need to find the WACC which can be found by the formula (Wd)*(Rd)*(1-T)+(Wps)*(Rps)+(Wce)(Rs) We are again given most of the values, so its plug-and-chug from here on, pretty much. Debt is 0. 30, PS is 0. 05, Equity is 0. 65, Rd is 0. 06, T is 0. 40, Rps is 0. 058, and Rs is 0. 12 So when plugged it looks like (0. 30*0. 06*(1-0. 40))+0. 05*0. 058+0. 65*0. 12, and that came out to 9. 17 percent.