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
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
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
$
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 =
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
*(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
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
+
$ 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
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Documents
Related Questions
Problem 2-12 (Algo)
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C
splits two for one in the last period.
Stock Po
A
B
P1 01
P2 02
00
140 145 145 145 145 145
135 290 130 290 130 290
270 290 280 290 145 580
C
Required:
Calculate the first-period rates of return on the following indexes of the three stocks (t = 0 to t = 1):
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
a. A market-value-weighted index.
b. An equally weighted index.
a. Rate of return
b. Rate of return
%
%
arrow_forward
4
t of
estion
Determine the market value of a Digicel Stock if Do = 3.00, Ks = 13%, G = 6%.
Select one:
O a.
O b.
O c.
O d.
$45.43
$30.29
$53.00
$3.18
arrow_forward
Question content area top
Part 1
(Common stock valuation) Assume the following:
•
the investor's required rate of return is
14.5
percent,
•
the expected level of earnings at the end of this year
(E1)
is
$6,
•
the retention ratio is
40
percent,
•
the return on equity
(ROE)
is
14
percent (that is, it can earn
14
percent on reinvested earnings), and
•
similar shares of stock sell at multiples of
6.742
times earnings per share.
Questions:
a. Determine the expected growth rate for dividends.
b. Determine the price earnings ratio
(P/E1).
c. What is the stock price using the P/E ratio valuation method?
d. What is the stock price using the dividend discount model?
e. What would happen to the P/E ratio
(P/E1)
and stock price if the company increased its retention rate to
80
percent (holding all else constant)? What would happen to the P/E ratio
(P/E1)
and stock price if the company paid out all its earnings in the form of dividends?…
arrow_forward
What are the equations for the questions in excel?
arrow_forward
Question content area top
Part 1
(Preferred stock valuation) Pioneer's preferred stock is selling for
$21
in the market and pays a
$2.70
annual dividend.
a. If the market's required yield is
11
percent, what is the value of the stock for that investor?
b. Should the investor acquire the stock?
Question content area bottom
Part 1
a. The value of the stock for that investor is
$enter your response here
per share. (Round to the nearest cent.)
Part 2
b. Should the investor acquire the stock? (Select from the drop-down menus.)
The investor
▼
should
should not
acquire the stock because it is currently
▼
underpriced
overpriced
in the market.
arrow_forward
Question content area top
Part 1
(Preferred stock valuation) Kendra Corporation's preferred shares are trading for
$29
in the market and pay a
$4.70
annual dividend. Assume that the market's required yield is
17
percent.
a. What is the stock's value to you, the investor?
b. Should you purchase the stock?
Question content area bottom
Part 1
a. The value of the stock to you, the investor, is
$enter your response here
per share. (Round to the nearest cent.)
arrow_forward
CH.8 STOCK MARKET, HW4, DUE IS ON MONDAY, MARCH 25,
BEFORE 11AM
Please show your calculation step by step. Otherwise, you will not get any credit
on that question.
1) You buy a stock for $34 per share and sell it for $36 after you collect a $1.00 per share dividend.
Your pretax capital gain yield is and your pretax dividend yield is?.
2) You buy a stock for $30 per share and sell it for $33 after holding it for slightly over a year and
collecting a $0.75 per share dividend. Your ordinary income tax rate is 28 percent and your capital
gains tax rate is 20 percent. Your after-tax rate of return is
arrow_forward
Please give Step by Step Answer
Otherwise i give DISLIKE !!
arrow_forward
QUESTION 17
A company has preferred stock that pays a constant $2.8 per share dividend. If the stock's required return is 8.9%, how much should you be willing to pay for a share of the
stock? Round your final answer to two decimal places (don't round intermediate calculations).
Click Save and Submit to save and submit. Click Save All Answers to save all answers.
arrow_forward
klp.5
arrow_forward
Question content area top
Part 1
(Preferred stock valuation) Pioneer's preferred stock is selling for
$40
in the market and pays a
$4.40
annual dividend.
a. If the market's required yield is
9
percent, what is the value of the stock for that investor?
b. Should the investor acquire the stock?
Question content area bottom
Part 1
a. The value of the stock for that investor is
$enter your response here
per share. (Round to the nearest cent.)
arrow_forward
Question content area top
Part 1
(Preferred stock valuation) Kendra Corporation's preferred shares are trading for
$40
in the market and pay a
$6.40
annual dividend. Assume that the market's required yield is
14
percent.
a. What is the stock's value to you, the investor?
b. Should you purchase the stock?
Question content area bottom
Part 1
a. The value of the stock to you, the investor, is
$enter your response here
per share. (Round to the nearest cent.)
Part 2
b. Should you acquire the stock? (Select from the drop-down menus.)
You
▼
should
should not
acquire the stock because it is currently
▼
overpriced
underpriced
in the market.
arrow_forward
1.
stock EPS share price Growth rate
A $0.30 $4.80 4%
B $0.40 $5.50 6%
C $0.50 $7.50 7%
D $0.60 $8.00 5%
Using the PEG ratio, rank the stocks in order of investment opportunity, the first having the best, the last having the worst.
A. C,B,D,A B. A,D,B,C C. C,D,B,A D. B,D,C,A
2.Which of the following not true regarding financial statement
A.Group financial statement be produced by each subsidiary as well as the parent entity
B.Profit must be separated between members of the parent company and that of minority interest
C.Minority interest share of equity represents that ‘part of a subsidiary’s equity not allocated to members of the parent company.
D.Group financial statements must be produced by the parent entity only.
E.None of the options provided.
arrow_forward
Stock
Price ($)
Dividend Yield
WSR
16
7
HCC
56
2
SNDK
80
2
You invested a total of $11,200 in shares of the 3 stocks shown above and
expected to earn $304 in annual dividends. If you purchased a total of 250
shares. How many of each did you purchase?
You are to do this problem using the Gauss Jordan method shown in the
book and in our recorded sessions. Show each matrix step as I have
modelled for you.
arrow_forward
F1
arrow_forward
Question 15
You own a portfolio that has $3,026 invested in Stock A and $4,300 invested in Stock B. Assume the
expected returns on these stocks are 12 percent and 18 percent, respectively.
Required:
What is the expected return on the portfolio? (Do not include the percent sign (%). Round your
answer to 2 decimal places (e.g., 32.16).)
arrow_forward
Kindly help me with general accounting question
arrow_forward
You calculated the value of a stock to be $108. The stock pays a dividend of $7.6. What is the most you should be willing to pay for the stock?
a.
$108+7.6
b.
less than $108
c.
$108
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you

Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning

Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Related Questions
- Problem 2-12 (Algo) Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two for one in the last period. Stock Po A B P1 01 P2 02 00 140 145 145 145 145 145 135 290 130 290 130 290 270 290 280 290 145 580 C Required: Calculate the first-period rates of return on the following indexes of the three stocks (t = 0 to t = 1): Note: Do not round intermediate calculations. Round your answers to 2 decimal places. a. A market-value-weighted index. b. An equally weighted index. a. Rate of return b. Rate of return % %arrow_forward4 t of estion Determine the market value of a Digicel Stock if Do = 3.00, Ks = 13%, G = 6%. Select one: O a. O b. O c. O d. $45.43 $30.29 $53.00 $3.18arrow_forwardQuestion content area top Part 1 (Common stock valuation) Assume the following: • the investor's required rate of return is 14.5 percent, • the expected level of earnings at the end of this year (E1) is $6, • the retention ratio is 40 percent, • the return on equity (ROE) is 14 percent (that is, it can earn 14 percent on reinvested earnings), and • similar shares of stock sell at multiples of 6.742 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (P/E1). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? e. What would happen to the P/E ratio (P/E1) and stock price if the company increased its retention rate to 80 percent (holding all else constant)? What would happen to the P/E ratio (P/E1) and stock price if the company paid out all its earnings in the form of dividends?…arrow_forward
- What are the equations for the questions in excel?arrow_forwardQuestion content area top Part 1 (Preferred stock valuation) Pioneer's preferred stock is selling for $21 in the market and pays a $2.70 annual dividend. a. If the market's required yield is 11 percent, what is the value of the stock for that investor? b. Should the investor acquire the stock? Question content area bottom Part 1 a. The value of the stock for that investor is $enter your response here per share. (Round to the nearest cent.) Part 2 b. Should the investor acquire the stock? (Select from the drop-down menus.) The investor ▼ should should not acquire the stock because it is currently ▼ underpriced overpriced in the market.arrow_forwardQuestion content area top Part 1 (Preferred stock valuation) Kendra Corporation's preferred shares are trading for $29 in the market and pay a $4.70 annual dividend. Assume that the market's required yield is 17 percent. a. What is the stock's value to you, the investor? b. Should you purchase the stock? Question content area bottom Part 1 a. The value of the stock to you, the investor, is $enter your response here per share. (Round to the nearest cent.)arrow_forward
- CH.8 STOCK MARKET, HW4, DUE IS ON MONDAY, MARCH 25, BEFORE 11AM Please show your calculation step by step. Otherwise, you will not get any credit on that question. 1) You buy a stock for $34 per share and sell it for $36 after you collect a $1.00 per share dividend. Your pretax capital gain yield is and your pretax dividend yield is?. 2) You buy a stock for $30 per share and sell it for $33 after holding it for slightly over a year and collecting a $0.75 per share dividend. Your ordinary income tax rate is 28 percent and your capital gains tax rate is 20 percent. Your after-tax rate of return isarrow_forwardPlease give Step by Step Answer Otherwise i give DISLIKE !!arrow_forwardQUESTION 17 A company has preferred stock that pays a constant $2.8 per share dividend. If the stock's required return is 8.9%, how much should you be willing to pay for a share of the stock? Round your final answer to two decimal places (don't round intermediate calculations). Click Save and Submit to save and submit. Click Save All Answers to save all answers.arrow_forward
- klp.5arrow_forwardQuestion content area top Part 1 (Preferred stock valuation) Pioneer's preferred stock is selling for $40 in the market and pays a $4.40 annual dividend. a. If the market's required yield is 9 percent, what is the value of the stock for that investor? b. Should the investor acquire the stock? Question content area bottom Part 1 a. The value of the stock for that investor is $enter your response here per share. (Round to the nearest cent.)arrow_forwardQuestion content area top Part 1 (Preferred stock valuation) Kendra Corporation's preferred shares are trading for $40 in the market and pay a $6.40 annual dividend. Assume that the market's required yield is 14 percent. a. What is the stock's value to you, the investor? b. Should you purchase the stock? Question content area bottom Part 1 a. The value of the stock to you, the investor, is $enter your response here per share. (Round to the nearest cent.) Part 2 b. Should you acquire the stock? (Select from the drop-down menus.) You ▼ should should not acquire the stock because it is currently ▼ overpriced underpriced in the market.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningFundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning

Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning

Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning