Question

1- In the previous 5 years, Google paid an annual dividend as follows:

Year Dividends

2011 - 2.7

2010- 2.5

2009- 2.2

2008- 1.8

2007- 1.5

Google is expected to pay a dividends of $3 in the next year (2012). What is the cost of equity of Google if its current stock price is $90?

2- As a technology-based firm, Google has a high beta of 1.4. if the risk-free rate of return is 5% and the market risk premium is 3%, calculate the cost of equity of Google using the capital asset pricing model (CAPM)?

3- As a financial analyst, you know that both DGM and the CAPM used in # 1 and # 2 above can be inaccurate, so you decided to calculate the average cost of equity of google. What is the average cost of equity of Google?

4- Google has a preferred stock that pays an annual dividend of 6$ to shareholders. What is the cost of Google's preferred stocks if it is currently priced at $100?

5- Google has one bond outstanding that matures in 20 years. This bond has a coupon rate of 8%, paid semiannually. The bond currently sells for $1,124. What is the pre-tax cost of debt of Google?

6- Google currently has a 5 million common shares outstanding, and a 1 million preferred shares outstanding, and 100,000 bonds outstanding. Use your answers in #3, #4, and #5 to calculate Google Weighted Average Cost of Capital (WACC) if the corporate tax rate is 35%.

**Motorola Mobility LLC** is a company that
develops mobile devices. Headquartered in Chicago, Illinois, United
States, the company was formed on January 4, 2011 by the split of
Motorola Inc. into two separate companies; Motorola Mobility took
on the company's consumer-oriented product lines, including its
mobile phone business and its cable modems and set-top boxes for
digital cable and satellite television services, while Motorola
Solutions retained the company's enterprise-oriented product lines.
Early 2012, Google decided to purchase Motorola mobility LLC for
$12.5b. Google had a plan to keep Motorola mobility for 5 years.
Google financial analysis team made the following forecasts:

Year. Cash flow(in billions. Net income (in billions)

2012 1.5 1

2013 2.5 2

2014 4 3

2015 3 2

2016 6 (includes 3.5b selling price) 1.5

And that the average book value of asset is $8b and Google's required rate of return is its WACC.

7- Calculate net present value (NPV) for the above investment decision. Would you accept or reject this investment decision? Why?

8- Calculate payback period. If you know that google accepts projects with 4 years payback period. Would you accept that project?

9- Calculate the Motorola project internal rate of return (IRR). Would you accept or reject this project? Why?

10- Calculate the average accounting return (AAR). If you know that the required average accounting return is 25%. Would you accept that project?

11- Calculate profitability index of the above project. Would you accept or reject that deal? Why?

**CALCULATE USING EXCEL and attach the Excel sheet
please**

Answer #1

1)

year
Cash flow(in billions)
Net income ( in billions)
2012
1.5
1
2013
2.5
2
2014
4
3
2015
5
2
2016
6 (includes 3.5b selling price)
1.5
Motorola Mobility LLC is a company that develops mobile devices.
Headquartered in Chicago, Illinois, United States, the company was
formed on January 4, 2011 by the split of Motorola Inc. into two
separate companies; Motorola Mobility took on the company's
consumer-oriented product lines, including its mobile phone
business and its cable modems...

1- In the previous 5 years, Google paid an annual dividend as
follows:
Year
Dividends
2011
2.7
2010
2.5
2009
2.2
2008
1.8
2007
1.5
1. Google is expected to pay a dividends of $3 in the next year
(2012). What is the cost of equity of Google if its current stock
price is $90? Calculate using excel (formulas
viewable).
2. 2- As a technology-based firm, Google has a high beta of 1.4.
if the risk-free rate of return is...

Calculate the average accounting return (AAR) using
excel (make formulas viewable). If you know that the
required average accounting return is 25%. Would you accept that
project?
Calculate profitability index of the above project using
excel (make formulas viewable). Would you accept or reject
that deal? Why?
Motorola Mobility LLC is a company that
develops mobile devices. Headquartered in Chicago, Illinois, United
States, the company was formed on January 4, 2011 by the split of
Motorola Inc. into two separate...

Google Currently has 5 million common shares outstanding, and a
1 million preferred shares outstanding, and 100,000 bonds
outstanding. Use your answers in #3, #4, and #5 to calculate Google
Weighted Average Cost of Capital (WACC) if the corporate tax rate
is 35%.
#3: Average cost of equity is 13.76%
#4: Cost of preferred stocks is 6.0%
#5: Annual pre-tax debt is 6.85%

Google currently has a 5 million common shares outstanding, and
a 1 million preferred shares outstanding, and 100,000 bonds
outstanding. #4 = 6%, and #5 = 6.85% to calculate Google Weighted
Average Cost of Capital (WACC) if the corporate tax rate is 35%.
(Using excel and making formulas viewable)
The average cost of equity of Google is
19.04%.
The cost of Google’s preferred stocks if it is currently
priced at $100 is 6%.
The pre-tax cost of debt of Google...

Before-tax cost of debt (B-T rd) 8%
Tax rate 34%
Net Price of Preferred stock (after deducting floatation costs)
$32.00
Dividend per share of Preferred $3.40
Current price of Common stock stock $52.00
Dividend paid in the recent past for Common $2.50
Growth rate 6%
Stock Beta 0.81
Market risk premium, (MRP) 6.2%
Risk free rate ( rf ) 5.5%
Flotation cost for common stock 5%
Weight of debt in the target capital structure 40%
Weight of preferred stock in...

Suppose tb pirates, inc., is expected to pay a $2 dividend in 1
year. If the dividend is expected to grow at 5% per year and the
required return is 20%, what is the price? Answer = $13.33
1.
If the TB Pirates common stock is trading today at $15, should
you buy it
A
Yes
B
No
2. Suppose an investment will cost $90,000 initially and will
generate the following cash flows: Year 1: 132,000 Year 2: 100,000
Year...

Blackmores company is evaluating the feasibility of investing
$80000 in a project with a 5 years life. The firm has estimated the
cash inflows associated with the proposal as shown in the following
table. The firm’s cost of capital is 8%. Company’s policy to recoup
investment is four years or less. Average book value is $13550
Year
cash inflows
Net income
1
$25000
$3000
2
$25000
$2500
3
$25000
$2250
4
$25000
$2600
5
$25000
$3200
Require:
a. Calculate the...

1. You bought a stock ten years ago for $90. The stock paid $8
in dividends each year you held it. What is your realized rate of
return if you sold it today for $75? Round your final
answer to 4 decimals.
2. Michaels Inc. preferred stock sells for $22 and has a 16%
required rate of return. Find the dividend Michaels pays to its
preferred shareholders. Round intermediate steps to four decimals
and your final answer to two decimals....

1. The company has 60,000 bonds with a 30-year life outstanding,
with 15 years until maturity. The bonds carry a 10 percent
semi-annual coupon, and are currently selling for $874.78.
2. You also have 100,000 shares of $100 par, 9% dividend
perpetual preferred stock outstanding. The current market price is
$90.00.
3. The company has 5 million shares of common stock outstanding
with a currently price of $17.00 per share. The stock exhibits a
constant growth rate of 10 percent....

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