Question

1. Best Buy has just paid a dividend of $4 per share (this dividend is already paid therefore it is not included in the current price). The companys dividend is estimated to grow at a rate of 35% in year 1 and 20% in year 2. The dividend is then expected to grow at a constant rate of 9.8% thereafter. The companys opportunity cost of capital is 12% what is the current value of Best Buy stock?

2. General Foods is forecasted to have a beta (measure of market risk) of 1.2 next year. The risk free rate over the next year is expected to be 1%. The return on the market is expected to be 8%. What is the required return of General Foods based on the firms market risk, calculate the return using the capital asset pricing model? (Similar to part c in the case and this material is covered in chapter 8 on pages 282-287). Write your answer as a decimal.

3. Suppose Best Buy company is forecasting a constant annual decline in its dividends of 4% (i.e. the constant growth rate is -4%). What price would you expect to pay for the stock with a 9.6% required rate of return and an annual dividend of $3 which will be paid next year?

4. Suppose General Foods has decided to enter the soda business and they will require additional capital. Management will finance the project by borrowing $100 million and by haulting dividend payments. Management forecasts that free cash flow for the next two years will be -$50, and $35 million. After year 2 the cash flows will grow at a rate of 4%. The current WACC for General foods is 9.7%. What is the firms price per share given there are 50 Million Shares outstanding?

Answer #1

Microsoft has just paid a dividend of $1 per share (this
dividend is already paid sometimes called Dividend 0). It is
estimated that the companys dividend will grow at a rate of 35% in
year 1 and 20% in year 2. The dividend is then expected
to grow at a constant rate of 7% thereafter. The
companys opportunity cost of capital is 11% what is an estimate
Microsofts stock using the nonconstant growth technique?

A company, GameMore, has just paid a dividend of $4 per share,
D0=$ 4 . It is estimated that the company's dividend
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A company has just paid a dividend of $ 2 per share,
D0=$ 2 . It is estimated that the company's dividend
will grow at a rate of 15 % percent per year for the next 2 years,
then the dividend will grow at a constant rate of 5 % thereafter.
The company's stock has a beta equal to 1.4, the risk-free rate is
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National Advertising just paid a dividend of D 0 = $1.25 per
share, and that dividend is expected to grow at a constant rate of
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4.50%. What is the company's current stock price?
a.
$16.64
b.
$17.26
c.
$18.89
d.
$19.02

Schnus Corporation just paid a dividend of $5.75 per share,
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thankyou !

The Kosten Warenhaus just paid a dividend of $2.00 (D0 =
$2.00)per share, and that dividend is expected to grow at a
constant rate of 7.50% per year in the future. The company’s beta
is 0.93, the market return is 9.0%, and the risk-free rate is
4.00%.
1. What is the required return on the stock, rs?
[Hint: Kj=Krf + B(Km – Krf)]
2. What is the company’s current stock price?

A company, GameMore, has just paid a dividend of $2 per share,
D0=$ 2 . It is estimated that the company's dividend
will grow at a rate of 15% percent per year for the next 2 years,
then the dividend will grow at a constant rate of 6% thereafter.
The company's stock has a beta equal to 1.4, the risk-free rate is
4.5 percent, and the market risk premium is 4 percent. What is your
estimate of the stock's current...

The Red River just paid a dividend of Do = $1.00 per
share, and that dividend is expected to grow at a constant rate of
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$18.45
$17.62
$16.36
$15.12
$14.31

The Birdstrom Co. just recently paid a dividend of $2.00 per
share. Stock market analysts expect that the growth rate for the
dividend will be 40% in year 1, 30% in year 2, 20% in year 3, 15%
in year 4, and 10% in year five. After the fifth year, the dividend
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Birdstrom is 12%, calculate the current stock price and the
expected dividend yield and capital...

Suppose General Foods has decided to enter the soda business and
they will require additional capital. Management will finance the
project by borrowing $100 million and by haulting dividend
payments. Management forecasts that free cash flow for the next two
years will be -$50, and $35 million. After year 2 the cash flows
will grow at a rate of 4%. The current WACC for General foods is
10%. What is the firms price per share given there are 50 Million...

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