FIN 550 Homework Student Workbook

xlsx

School

Southern New Hampshire University *

*We aren’t endorsed by this school

Course

550

Subject

Finance

Date

Feb 20, 2024

Type

xlsx

Pages

12

Report

Uploaded by AmbassadorZebra1442

Assignment 3-1, Question 1 1a. Calculate the value of the stock today: 1. Calculate the PV of the dividends paid during the supernatural grow $ % $1.15 x 1.15 = $1.32 x 1.15 = $1.52 x 1.13 = PV of Dividends = 1.72 + 30.36 2. Find the PV of Turbo's stock price at the end of Year 3: = = 32.08 0.892857 = 28.64285256 = $ 28.64 3. Sum the two components to find the value of the stock today: $ + 25.22 + 1.2 + D 1 = D 2 = D 3 = P 3 ^ = ____D 4 ____ __ _D 3 (1+g)______ r s -g r s -g PV of P 3 ^ = Value of current stock (P 0 ) = 1b. Calculate P 1 ^ and P 2 ^. P 1 ^ =
$ + $ = 1c. Calculate the dividend yields and capital gains yield for Years 1, 2, and 3. Year Dividend Yield + 1 $1.3225/$25.23 ≈ 5.24% + 2 $1.52/$26.93 ≈ 5.65% + 3 $1.72/$28.64 ≈ 6.00% + P 2 ^ =
wth period: $ $1.32 $1.52 $1.72 + 0.797 = 25.92 $ = $ 1.30 = 31.56
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$ Capital Gains Yield = Total Return ($26.93 - $25.23) / $25.23 ≈ 6.74% 12% $28.64/$26.93-1≈ 6.35% 12% $30.36 / $28.64 ≈ 6.00% 12%
Assignment 3-1, Question 2 = 10% r ps
Assignment 3-1, Question 3 3a. Calculate McCaffrey's value of operations. FCF(1+g) = 100000* WACC - g (.11- 3b. Calculate the company's total value. Total Value = Value of Operations + Value of nono = $ 2,675,000 + $ 3c. Calculate the estimated value of common equity. Value of equity = Total value - Value o = $ 3,000,000 - $ 3d. Calculate the estimated per-share stock price. Price per share = Value of Equity ÷ Number o = $ 2,000,000 ÷ 50000 V op =
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*(1+0.07) = $ 2,675,000 -.07) operating assets 325,000 = $ 3,000,000 of debt 1,000,000 = $ 2,000,000 of Shares = $ 40
Assignment 5-2, Question 1 a. Net Present Value (NPV): -$10,000 + $ 6,500 (1+0.12)^1 -$10,000 + $ 3,500 (1+0.12)^1 Internal Rate of Return (IRR): To solve for each project's IRR, find the discount rates that equ = 15% = 14% Modified Internal Rate of Return (MIRR): To obtain each project's MIRR, begin by finding each project's term = $6,500/ (1.12)^1 = $3,500/ (1.12)^1 Now, each project's MIRR is the discount rate that equates the PV = 15% = 14% Profitability Index (PI): To obtain each project's PI, divide its present value of future cash fl NPV x = NPV y = IRR x IRR y TV x TV y MIRR x MIRR y
= + = $ 966 + = + = $ 631 + = ÷ = $ 10,966 ÷ = ÷ = $ 10,631 ÷ PV x NPV x PV y NPV y PI x PV x PI y PV y If the projects are independent, then they both should be accepted Net present value. Net present value is the present value of the ca rate of return of your project compared to your initial investment. it is because the Internal rate of return is greater than cost of the c in financial analysis to estimate the profitability of potential invest consider is the modified internal rate of return. The MIRR is a finan investment's attractivenes. The MIRR is profitability index is greate capital. If the projects were mutually exclusive, then project x shou y. The project x has a higher NPV, IRR, MIRR and profitability index
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+ $ 3,000 + $ 3,000 + $ 1,000 = (1+0.12)^2 (1+0.12)^3 (1+0.12)^4 + $ 3,500 + $ 3,500 + $ 3,500 = (1+0.12)^2 (1+0.12)^3 (1+0.12)^4 uate each NPV to zero: minal value (TV) of cash inflows: + $3,000/ (1.12)^2 + $3,000/ (1.12)^3 + + $3,500/ (1.12)^2 + $3,500/ (1.12)^3 + of the TV to each project's cost, $10,000: flows by its initial cost. The PV of future cash flows can be found from the NPV calculated earlier:
Cost of X $10,000 = $ 10,966 Cost of Y $10,000 = $ 10,631 Cost of X $10,000 = $1.10 Cost of Y $10,000 = $1.06 d. They both have positivie ash flows at the required . Another reason to accept capital. IRR is a metric used tments. The last things to ncial measure of an er than 1 and the cost of uld be picked over project x.
$966 $631 $1,000 = 10966 $3,500 = 10631
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