1. How much should you pay for the preferred stock of the Dakota Doorknob Company if it has $100 par value, pays $8.50 a share in annual dividends, and your required rate of return is 10 percent?

2. NDV Corp.'s common stock is expected to pay a $2 dividend, which will grow at a compound rate of 4 percent indefinitely.

a. If the market requires a 14 percent return, what should be the current market price of the stock? b. If the current market price of the stock is $40, what rate of return is the market requiring?

3. The stock of Macbeth Cleaning Corp. is currently selling for $25 a share. The company is expected to pay a dividend of $0.75 at the end of this year. If you bought Macbeth stock today and sold it for $29 after receiving the dividend, what rate of return would you earn?

4. Sooty Iron Works, Inc. has had declining sales and increasing expenses over the last decade and expects this trend to continue. As a result, the company predicts that earnings and dividends will decline indefinitely at a rate of 4 percent per year. Sooty's last dividend (D0) was $2 per share. If the market required rate of return is 12 percent, estimate the value of Sooty's common stock.

5. You are interested in purchasing the common stock of Azure Corporation. The firm paid recently a dividend of $3 per share. It expects earnings to grow at a rate of 7% for the foreseeable future. Currently, similar risk stocks have required returns of 10%.

Required:
A) Given the data above calculate the present value of this security B) One year later your stockbroker in the bank offers to sell you additional shares of Azure for $73. The most recent dividend paid was $3.21 and that the expected growth in earnings is still 7%. To determine the required rate of return, you decided to use the capital asset pricing model (CAPM). The risk free rate is currently 5.25% and the market return is 11.55% and this...

...Common StockValuation
Chapter 10
Fundamental Analysis Approaches
Present value approach
1 Capitalization of expected income
2 Intrinsic value based on the discounted value of the expected stream of cash flows
Multiple of earnings (P/E) approach
• Stock worth some multiple of its future earnings
Present Value Approach (Capitalization of Income)
Intrinsic...

...Capital Valuation
FIN/419
November 15, 2010
Jon Payne
Capital Valuation
One of the primary concerns of management and particularly for a finance manager is to maximize the wealth of the owners for whom the company is run. Creation of wealth is “measured by the share price of the stock, which in turn is based on the timing of returns (cash flows), their magnitude, and their risk” (Gitman, 2006, p. 15). A discussion of how Lowe’s values...

...2 MODELS FOR THE VALUATION OF SHARES.
2.1 The concept of a cost of equity
The cost of equity is the cost to the company of providing equity holders with the return they require on their investment.
The primary financial objective is to maximize the return to equity shareholders. This return is as the future dividend yield
and capital growth.
Until new shareholders become members of the company, the objective above is concerned with existing shareholders.
Company management...

...MSc Thesis: Valuation of Integrated Oil & Gas Companies
Irakli Menabde
Valuation of Integrated Oil & Gas Companies
A comparative analysis of methodologies and empirical practices
MSc Thesis
MSc in International Business and Economics: Cand. Merc Finance and Strategic Management (FSM) Copenhagen Business School
Date 09/10/2008 Author: Irakli Menabde
MSc Thesis: Valuation of Integrated Oil & Gas Companies
Irakli Menabde...

...The Best StockValuation Method
When trying to figure out which valuation method to use to value a stock for the first time, most investors will quickly discover the overwhelming number of valuation techniques available to them today. There are the simple to use ones, such as the comparable method, and there are the more involved methods, such as the discounted cash flow model. Which one should you use? Unfortunately,...

...at a rate equal to or lower than that of the economy and have an established and stable dividend payout.
In order to estimate the cost of equity using the Dividend Growth Model, we simply adjust the model's equation for estimating the price of a stock, given as such:P = D1 / (r - g)Where P = the price of the stockD1 = the expected Dividend in one yearr = the required rate of returng = the expected Growth ConstantBy solving the equation for k we get the following:P(r - g) = D1r...

...XYZ Company Limited
Date
Valuation Report: DUMMY
Executive Summary
INDUSTRY: XX
XYZ Company Limited (hereinafter referred to as “XYZ” or “the company”) is a XX manufacturing
company and markets its products under the brand name XX in the XX region of India.
Business valuation summary of XYZ
Multiple used
EV/tonne method
Equity value Rs mn Value per share (Rs)
Rs 5,809 per tonne
EV/EBITDA method
4.5x
Discounted Cash Flow method
NA...

...Ilit
Raz
EMBA
–
Dickens
Cohort
Jan
2013
Company Valuation - Elbit Systems Ltd.
The following document will try to describe the financial assets and the portfolio of “Elbit Systems” and a company valuation. As part of my military service I spend some time in different project in Elbit Systems, working with their R&D department. For the company valuation I’ll use Discount Cash Flow (DCF) method. After...