Question

You estimate that AE Corp has a 20% chance of generating 30% returns, a 20% chance of generating -40% returns, and a 60% chance of generating 10% returns. What are the expected returns and standard deviation of AE Corp?

Acme Inc. plans to pay a $1/share dividend on a quarterly basis.
What is the price of their shares given a 12% *annually
compounded* cost of capital? What if the firm plans to increase
its dividend by 5% every yea

Answer #1

Acme Inc. plans to pay a $1/share dividend on a quarterly basis.
What is the price of their shares given a 12% annually
compounded cost of capital? What if the firm plans to increase
its dividend by 5% every year?

The Stetson Corp. estimates that it will have free cash flow of
$20 million, $30 million and $40 million in the next three years
respectively. After that, FCF will grow at 8% indefinitely. Their
cost of capital is 9.4%, and they have $120 in debt, $30 million of
preferred stock and $20 million in short term investments. There
are 10 million shares of common stock outstanding. Estimate the
price per share of common stock using the FCF valuation model.

You are trying to estimate the cost of capital for Miami corp,
and have collected the following information:
The firm has $ 750 million in interest-bearing debt on its
books, with a Market Value of $ 692.90 million. On the loan, the
Company pays $ 40 million in annual interest expenses.
The weighted average maturity of the debt is 5 years. The bond
rating for the firm is A-, and the default spread over the T.Bond
rate is 2%.
There...

WEEK 5 HW CORP FIN 3
SHOW YOUR CALCULATIONS FOR #13-#20.
You have the option of performing calculations manually or with
the use a financial calculator or spreadsheet. Either way, you must
specify what is being calculated to earn credit:
13. Lion Equity paid an annual dividend of $3.25 per share last
month, and it is anticipated that future dividends will increase by
4% annually. As a shareholder, if you require a 12% return on your
investment in Lion Equity,...

Maynard Steel plans to pay a dividend of $3.17 this year. The
company has an expected earnings growth rate of 4.2% per year and
an equity cost of capital of 9.3%.
a. Assuming Maynard's dividend payout rate and expected growth
rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $1.01 this year
and use the remaining $2.16 per share to repurchase shares. If...

Maynard Steel plans to pay a dividend of $3.16 this year. The
company has an expected earnings growth rate of 3.6% per year and
an equity cost of capital of 10.4%.
a. Assuming that Maynard's dividend payout rate and expected
growth rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $1.07 this year
and use the remaining $2.09 per share to repurchase shares....

Husky Manufacturing Inc. currently has $15,000,000 in bonds
outstanding with a coupon rate of 5% that is paid semi-annually.
The bonds will mature in 5 years are currently selling at a quoted
price of 92. The company also has 30,000 shares of 7% preferred
stock outstanding currently selling for $95 per share with a par
value of $100. In addition, the company has 500,000 common shares
outstanding selling for $60 per share and with a book value of $30.
The...

Easy Car Corp. is a grocery store located in the Southwest. It
expects to pay an annual dividend of ?$6.30 next year to its
shareholders and plans to increase the dividend annually at the
rate of 5.0?% forever. It currently has 600,000 common shares
outstanding. The shares currently sell for ?$60 each. Easy Car
Corp. also has 20,000 semiannual bonds outstanding with a coupon
rate of 8.9141?%, a maturity of 26 ?years, and a par value of
?$1,000. The bonds...

Preston Corp. is estimating its WACC. Its target capital
structure is 20 percent debt, 20 percent preferred stock, and 60
percent common equity. Its bonds have a 12 percent coupon, paid
semiannually, a current maturity of 20 years, and sells for $1,100.
The firm could sell, at par, $100 preferred stock which pays a 5.46
percent annual dividend, but flotation costs of 5 percent would be
incurred. Preston's beta is 1.2, the risk-free rate is 3 percent,
and the market...

QUESTION 1:
XYZ Inc. has 10 million shares of common stock outstanding. The
current share price is $20 per share. The most recent dividend was
$1 and the dividend growth rate is 4%.
XYZ also has a bond issue outstanding, which is maturing in 15
years, has a face value of $100 million, 7% coupon payable
annually, and sells for 83.8786% of the face value.
XYZ also has 2,000,000 preferred shares outstanding, which are
currently selling for $40 per share...

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