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Semilion · May 30, 2012, 04:18 PM

Ewald Company’s current stock price is $36 and its last dividend was $2.40. The required rate of return is 12%. If dividends are expected to grow at a constant rate g in the future, what is Ewald’s stock price 5 years from now?

Semilion · May 30, 2012, 04:19 PM

Assume a major investment service has just given Oasis Electronics its highest investment rating, along with a strong buy recommendation. As a result, you decide to take a look for yourself and place a value on the company’s stock. Here’s what you found: This year, Oasis paid its shareholders an annual dividend of $3 per share, but because of its high growth rate in earnings, its dividends are expected to grow at the rate of 12% per year for the next four years and then level out at 9% a year. So far, you have learned that the stock has a beta of 1.8, the risk-free rate of return is 6%, and the expected return on the market is 11%. What is the value of this stock as of today?

Semilion · May 30, 2012, 04:23 PM

Your friend asks you to invest $10,000 in a business venture. Based on your estimates, you would receive nothing for four years, at the end of year 5 you would receive interest on the investment compounded annually at 8%, and at the end of year 6 you would receive $14,500. If your estimates are correct, what would be the IRR on this investment?

Semilion · May 30, 2012, 04:23 PM

Hook Industries capital structure consists of solely debt and equity. It can issue debt at rd =11% and its common stock currently pays a dividend of $2 per share. The stock’s current price is $24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 35% and its WACC is 13.95%. What percentage of the firm’s capital structure consists of debt?

Semilion · May 30, 2012, 04:24 PM

A project has annual cash flows of $7,500 for the next 10 years and then $10,000 each year for the following 10 years. The IRR of this 20 year project is 10.98%. If the firm’s WACC is 9% what is the project’s NPV?

Curlyben · May 30, 2012, 10:31 PM

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