(7–2)
Constant Growth Valuation
Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Boehm’s stock?

For this problem we can use the formula from the book P=d1(R-G) to find the price. We just need to plug in the values... so, 1.5/(8% [15-7]). The value is 18.75.

(7–4)
Preferred Stock Valuation
Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return?

From the book we discover that we simply need to plug into the formula, r=5/50. The required rate of return should be 10 percent.

(7–5)
Nonconstant Growth Valuation
A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price?

I used the financial calculator online for this problem, but we can find it manually...

To solve this problem we need to first calculate the required rate of return, which is Rs=Rf+B(Rrm-Rrf), so 7.5+(11.5-7.5)*1.2=12.3... So, D0 would be 2, D1 would be 2.4, D2 would be 2.88, and D3 would be 3.08. We then have to calculate the PV for the dividends, which is 4.42. We have to calculate P2, which came out to 46.10. After adding up the PV values we get the stock’s price which is 50.50, or at least that’s what I got...

(9-1)
After-Tax Cost of Debt
Calculate the after-tax cost of debt under each of the following conditions: •a. Interest rate of 13%, tax rate of 0%
To calculate, take...

...percent for the next three years, and by 10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in year 3 and 4. (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answers to the nearest whole number.)
Number of copies sold after 3 years
Number of copies sold in the fourth year
Link to Text
Question 2
Find the present value of $3,500 under each of the following rates and periods.
(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)
a. 8.9 percent compounded monthly for five years.
Present value
$
b. 6.6 percent compounded quarterly for eight years.
Present value
$
c. 4.3 percent compounded daily for four years.
Present value
$
d. 5.7 percent compounded continuously for three years.
Present value
$
2949.88
Question 3
Trigen Corp. management will invest cash flows of $331,000, $616,450, $212,775, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 6.75 percent, what is the future value of these investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)
Future value
$
Link to Text
Question 4
You wrote a piece of software that does a better job of allowing computers to network than any other program...

...required rate of return on the stock, r(s), is 15%. What is the value per share of Boehm’s stock?
1.50 / (0.15 – 0.07) = $18.75
7-4 Preferred Stock Valuation
Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return?
$5 / $50 = 10%
7-5 Non-constant Growth Valuation
A company currently pays a dividend of $2 per (D0= $2). It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk free rate is 7.5%, and the market risk is 4%. What is your estimate of the stock's current price?
7.5% + (4%) 1.2 = 12.3%
D0 = $2.00
D1 = $2.00(1.20) = $2.4
D2 = $2.00(1.20)^2 = $2.88
D3 = $2.88(1.07) = $3.08
PVDiv = $2.40/(1.123) + $2.88/(1.123)2
$2.14 + $2.28 = $4.42
P2 = D3/(rs – g) = $3.08/ (0.123 – 0.07) = $58.11
PV = $58.11/ (1.123)^2 = $46.08
P0 = $4.42 + $46.08 = $50.50
Problems (p. 371)
9-2 After-Tax Cost of Debt
LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue at par new bonds that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is LL's after-tax cost of debt?
0.08 (0.65) = 5.2%
9-4 Cost of Preferred Stock with Flotation Costs
Burnwood Tech...

...FI515
Week4Homework
P7-2
Chapter 7
Constant Growth Valuation
7–2)
Dividend Expected
Growth Rate
Required ROR stock (rs)
1.50/(.07-.15)=
Stock price
Price = Dividend / (Required Return - Growth Rate)
P7-4
$1.50
7%
15%
Constant Growth Valuation
Boehm Incorporated is expected to pay a $1.50 per share
dividend at the end of this year (i.e., D1 = $1.50). The
dividend is expected to grow at a constant rate of 7% a
year. The required rate of return on the stock, rs, is 15%.
What is the value per share of Boehm’s stock?
$18.75
Preferred Stock Valuation
(7–4)
Dividend
Price of Stock
Required Return
P7-5
$5.00
Zero Growth Stock Price = Dividend / Required Return
$50
Nick’s Enchiladas Incorporated has preferred stock
outstanding that pays a dividend of $5 at the end of each
year. The preferred sells for $50 a share. What is the
stock’s required rate of return?
10% Required Return = Dividend / Price
(7–5)
Nonconstant Growth Valuation
Nonconstant Growth Valuation
Step 1: Calculate the required rate of return using CAPM
A company currently pays a dividend of $2 per share (D0 =
$2). It is estimated that the company’s dividend will grow
at a rate of 20% per year for the next 2 years, then at a
constant rate of 7% thereafter. The company’s stock has a
beta of 1.2, the risk-free rate is 7.5%, and the market risk
premium is...

...
In this document of FIN515Week 2 HomeworkAssignment Problems you will find the next information:
Prob 3-1
Prob 3-2
Prob 3-3
Prob 3-4
Prob 3-5
Prob 3-6
Prob 3-7
Prob 4-1
Prob 4-2
Prob 4-6
Prob 4-13a
Prob 4-14
Business - Finance
FIN-515 Managerial Finance - Weekly Assignments - All 7 Weeks, got A+
Week 1
HomeworkAssignment
Complete the following graded homeworkassignment in a Word document named “ FIN515_Homework1_yourname ." Show the details of your calculations/work in your answer to the problems.
· Mini Case (p. 45)
· Problems (p. 79)
o 2-6 Statement of Retained Earnings
o 2-7 Corporate Tax Liability (calculate tax liability and AT income)
o 2-9 Corporate After-Tax Yield (muni, corp, PS)
Submit your assignment to the Dropbox located on the silver tab at the top of this page. For instructions on how to use the Dropbox , read these Step-by-Step Instructions or watch this Dropbox Tutorial .
See Syllabus "Due Dates for Assignments Exams" for due date information.
Week 2
Homework...

...
Homework
(2-6) Statement of Retained Earnings
In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year?
Answer:
NI = $50,000,000; R/EY/E = $810,000,000; R/EB/Y = $780,000,000; Dividends = ?
R/EB/Y + NI – Div = R/EY/E
$780,000,000 + $50,000,000 – Div = $810,000,000
$830,000,000 – Div = $810,000,000
$20,000,000 = Div.
(2-7) Corporate Tax Liability
The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000, and (4) income taxes. What are the firm’s income tax liability and its after-tax income? What are the company’s marginal and average tax rates on ta
Answer:
Income $365,000
Less Interest deduction (50,000)
Plus: Dividends received 4,500
Taxable income $319,500
For a corporation, 70% of dividends received are excluded from taxes; therefore, taxable dividends are calculated as $15,000(1 - 0.70) = $4,500.
Tax = $22,250 + ($319,500 - $100,000)(0.39) = $22,250 + $85,605 = $107,855.
After-tax income:
Taxable income $319,500
Taxes (107,855)
Plus Non-taxable dividends received 10,500
Net income $222,145
Non-taxable dividends are calculated as...

...Running head: Week 1 AssignmentWeek 1 Assignment:
Mini Case (p.45)
Problems (p.79)
Alisha Clarke
Managerial Finance
Week 1 Assignment
Professor Gaggar
September 9, 2012
a) Why is corporate finance important to all managers?
Corporate finance is important because it enables managers to have an understanding of what funds would be necessary for upcoming projects and projects of their company as well as allowing them to plan ahead.
b) Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.
When a company is evolving from a start up to a major corporation, it will probably have to grow through the stages of sole proprietorship, partnership, and then a corporation. A sole proprietorship has advantages such as being easily and inexpensively formed and has to deal with less regulation by the government. Some of the disadvantages of a sole proprietorship include difficulties with obtaining capital to enable. The life of a cole proprietorship is limited to the life of the owner Some of the advantages to a partnership are similar to that of a sole proprietorship, however there is more of a liability placed on partnerships because they are responsible for the company’s debt. When it comes to a corporation, the advantages included the unlimited life of the company...

...CLICK TO DOWNLOAD
FIN515 Final Exam 1
Page 1:
1. (TCO A) Which of the following does NOT always increase a company's market value? (Points : 5)
2. (TCO F) Which of the following statements is correct? (Points : 5)
3. (TCO D) Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?
4. (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in January, $35,000 in February, and $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, what are the expected cash receipts for March?
Page 2
1. (TCO H) Zervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an improved inventory management system could lower the average inventory by $4,000, (b) that improvements in the credit department could reduce receivables by $2,000, and (c) that the purchasing department could negotiate better credit terms and thereby increase...

...
In this paperwork of FIN515Week4 Midterm you will find the next information:
1. (TCO A) Which of the following statements is CORRECT?
2. (TCO G) Which of the following statements is CORRECT?
3. (TCO G) LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant?
4. (TCO B) You want to buy a new sports car three years from now, and you plan to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the third deposit, three years from now?
5. (TCO B) You sold a car and accepted a note with the following cash flow stream as your payment. What was the effective price you received for the car assuming an interest rate of 6.0%?
6. (TCO B) Suppose you borrowed $14,000 at a rate of 10.0% and must repay it in five equal installments at the end of each of the next five years. How much interest would you have to pay in the first year?
7. (TCO D) A 15-year bond with a face value of $1,000 currently sells for $850. Which...