Question

You expect Tiger Corp will pay $50 million in dividends and repurchase $80 million of its stock over the next 12 months (Year 1). You expect dividends and share repurchases to grow 8% in Year 2 and 7% in Year 3. You also expect Tiger could be bought by a larger competitor at the end of Year 3 for $3.5 billion. If all payments are made at year end, and you have calculated the cost of equity to be 9.0%, what do you estimate the market value of Tiger’s net worth should be now? (Start by drawing a timeline.)

If Tiger Corp of Q #1 currently has 100,000,000 shares outstanding, what is your estimated market value per share now?

GEP Corp is considering a large plant expansion/modernization which will cost $115 million initially and another $70 million at the end of year 2. This project is expected to produce incremental after-tax profits of $35 million, $40 million, $35 million, $62 million, and $47 to be received at the end of years 1, 2, 3, 4 and 5 respectively. If the WACC is 7%, what is the project’s NPV? (Start by drawing a timeline.)

What is the MIRR for GEP’s project described in Q #3? (Use 7% WACC for both PV of costs and FV of returns. Your answer should be a % carried to 1 place.)

please answer handwritten with all the work shown thank you and no excel and no table for timeline

Answer 1

Tiger Corp

GEP Corp

Good Luck