(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...

...copies in its first year. The publishing company expects the sales to grow at a rate of 20 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...

...at the end of this year (i.e., D (1) = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The 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 /...

...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...

...
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...

...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...

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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...

...
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...