Question

1.)Seagate Technology is a global leader in data storage solutions and a high-yield dividend payer. From 2015 through 2019,

Seagate paid the following per-share dividends:

**Year
Dividen**

**2019
2.56**

**2018
2.29**

**2017
1.82**

**2016
1.18**

**2015
1.56**

Assume that the historical annual growth rate of Seagate
dividends is an accurate estimate of the future constant annual
dividend growth rate. Use a 21%

required rate of return to find the value of Seagate's stock
immediately after it paid its2019

dividend of$2.56

2.)

Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nabor have decided to make their own estimate of the firm's common stock value. The firm's CFO has gathered data for performing the valuation using the free cash flow valuation model. The firm's weighted average cost of capital is 13 %, and it has $ 2,150, 000 of debt at market value and

$ 430,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 2020 through 2024, are given in the table,

**2020 $260,000
2021 $310,000
2022 $350,000
2023 $410,000
2024 $490,000**

Beyond 2024 to infinity, the firm expects its free cash flow to grow by 4 % annually.

a. Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model. b. Use your finding in part a, along with the data provided above, to find Nabor Industries' common stock value. c. If the firm plans to issue 200 comma 000shares of common stock, what is its estimated value per share?

3.)Given the following information for the stock of Foster Company, calculate the risk premium on its common stock.

**Current price per share of common stock
$56.96
Expected dividend per share next year $4.74
Constant annual dividend growth rate 6.6%
Risk-free rate of return 7.3%**

The risk premium on Foster stock is:

Answer #1

Here multiple questions posted and as per policy we have to
solve one but i am doing 1 and 3

1)growth=16.87%

return=21%

dividend(d0)=2.56

stock price=D0*(1+g)/(k-g)

=2.56*(1+16.87%)/(21%-16.87%)

=72.44

3) current price= expected dividend next year/(return-growth
rate)

56.96=4.74/(k-6.6%)

k=14.92%

k= risk free rate+risk premium

risk premium=14.92%-7.3%=7.62%

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