Amazon equity beta Market risk premium 1.5 5.00% 10-year Treasury 1 Jan 2020 Cost of equity 1.90% Cost of debt 2.00% Shares outstanding 31 Dec 2019 504 million Debt/ (debt + equity) 2.60% Tax rate 17.0% Discount rate (WACC) Growth rate
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- Assume the risk-free rate on long-term Treasury bonds is 6.04%. Assume also that the average annual return on the Winslow 5000 is 11% as the expected return on the market. Use the SML equation (i.e., CAPM) to calculate the two companies' required returns. Bartman Industries Reynolds Inc. Year Stock Price Dividend Holding period return Stock Price Dividend Holding period return 2020 $17.25 $1.15 $48.75 $3.00 2019 14.75 1.06 52.30 2.90 2018 16.50 1.00 48.75 2.75 2017 10.75 0.95 57.25 2.50 2016 11.37 0.90 60.00 2.25 2015 7.62 55.75Faux Corp Stock Over the Last 10 years - Beta = 1.1 - Market Risk premium = 10% - Current risk-free rate 3% - Last dividend $5 - Current Stock Price $30 Dividend History 2016 - $4.20 2017 - $4.40 2018 - $4.55 2019 - $4.75 2020 - $5.00 1. Calculate the cost of equity using SMLFaux Corp Stock Over the Last 10 years - Beta = 1.1 - Market Risk premium = 10% - Current risk-free rate 3% - Last dividend $5 - Current Stock Price $30 Dividend History 2016 - $4.20 2017 - $4.40 2018 - $4.55 2019 - $4.75 2020 - $5.00 Dividend Growth Rate = 17.83% 1. Calculate the Cost of Equity using DGM
- Joe Corps Stock Over the Last 10 years –Beta = 1.1 –Market risk premium = 10% –Current risk-free rate = 3% –Last dividend = $5 –Current stock price =$30 - Dividend History 2016 $4.20 2017 4.40 2018 4.55 2019 4.75 2020 5.00 Cost of equity = 14% Cost of equity = 3% + 1.1 * 10% Cost of equity = 3% + 11% Which of the two models are correct? Cost of equity under DGM: 37.46% Cost of equity = ((5.89 / 30) + .1783) .3746 = 37.46% Cost of equity under DGM: 37.46% 1. Which of the two models are correct?Roundall dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percentrounded to one decimal place. 26. The historical stock returns for GAF, Inc. are listed below: Year -Annual Stock Return2013 -12%2014 14%2015 35%2016 2%2017 -16%2018 8%2019 0%2020 34%2021 12%2022 6% What is the standard deviation of returns for GAF, Inc. stock over the 10-year time period? (Compute the standard deviation assuming this is a population of returns, not a sample – that is, use the procedure describedin the textbook for calculating the standard deviation of a series of stock returns).27. The end of year stock price and the dividend paid each year for Maxwell, Inc. stock for years 0 through 6 arelisted in the table below: Year -End of Year Stock Price- Dividend0 $12.00 $ 01 $14.86 $1.802 $7.95 $1.883 $8.00…Q18 Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 8 percent. Safeco’s recent dividend was $0.88.What is the value of Safeco stock when the required return is 12 percent? (Round your answer to 2 decimal places.) VALUE OF STOCK
- number of outstanding shares100 000Earnings300 000Retention ratio60%91-day Treasury bill rate6%Market risk premium8%UFSK Beta1.2Dividend growth rate stable phase5%Bonds outstanding5 000Par value per bond1000Semi-annual coupon rate on bonds6%Bond yield to maturity8%Bond years remaining to maturity4Corporate tax rate30%Additional informationUFSK limited recently paid a dividendUFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.Required:. Determine the fair value of UFSK limited bondnumber of outstanding shares100 000Earnings300 000Retention ratio60%91-day Treasury bill rate6%Market risk premium8%UFSK Beta1.2Dividend growth rate stable phase5%Bonds outstanding5 000Par value per bond1000Semi-annual coupon rate on bonds6%Bond yield to maturity8%Bond years remaining to maturity4Corporate tax rate30%Additional informationUFSK limited recently paid a dividendUFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.Required:Ascertain the market value of UFSK limited equity.number of outstanding shares100 000Earnings300 000Retention ratio60%91-day Treasury bill rate6%Market risk premium8%UFSK Beta1.2Dividend growth rate stable phase5%Bonds outstanding5 000Par value per bond1000Semi-annual coupon rate on bonds6%Bond yield to maturity8%Bond years remaining to maturity4Corporate tax rate30%Additional informationUFSK limited recently paid a dividendUFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.Required:Determine the total value of the company’s debt
- number of outstanding shares100 000Earnings300 000Retention ratio60%91-day Treasury bill rate6%Market risk premium8%UFSK Beta1.2Dividend growth rate stable phase5%Bonds outstanding5 000Par value per bond1000Semi-annual coupon rate on bonds6%Bond yield to maturity8%Bond years remaining to maturity4Corporate tax rate30%Additional informationUFSK limited recently paid a dividendUFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.Required:As an investment analyst advise your client how much must she expect to pay for UFSK limited stock.Faux Corp Stock Over the Last 10 years - Beta = 1.1 - Market Risk premium = 10% - Current risk-free rate 3% - Last dividend $5 - Current Stock Price $30 Dividend History 2016 - $4.20 2017 - $4.40 2018 - $4.55 2019 - $4.75 2020 - $5.00 1. Calculate the dividend growth rateQUESTION: Find WACC (discount rate) Additional Info: Analysts expect the firm’s revenues, earnings, capital expenditures, and depreciation to grow at 9.9% a year from 2019 to 2021, after which time the growth rate is expected to drop to 3%. The depreciation expense for 2019 is $5.182 billion. Capital spending is expected to offset depreciation in the stable state period. The yield on 30-year treasury bonds is 2% and the equity market risk premium is 6.2%. The shares outstanding as of 12/31/2019 were 3,516,000,000 and the stock price was $60 per share. The average price of the company’s long-term corporate Bonds was 123.95 with an average yield to maturity of 4.16%. The company’s long-term bonds have a bond rating of AA. Shares Outstanding 3,516,000,000 Stock Price $60 Yield (30Y Treasury) 2% Equity Market Risk Prem. 6.2% Avg. Price LT Corp. Bond 123.95 Avg. YTM 4.16% Depreciation Expense (2019) 5,182,000,000 Current Stock Price 54.58…