1. Company Y does not plow back any earnings and is expected to produce a level dividend stream of $5 a share. If the current stock price is $40, what is the market capitalization rate? (Enter your answer as a percent rounded to 1 decimal place.) Market capitalization rate = ? 2. Company Z-prime’s earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $10, the market capitalization rate is 8% and next year’s EPS is $15. What is Z-prime’s stock price? stock price= ? 3.. Pharmecology just paid an annual dividend of $1.35 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 2.75% per year. The nominal cost of capital is 9.5%. What is Pharmecology’s current stock price? What would be Pharmecology’s current stock price using forecasted real dividends and a real discount rate? 4. Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2016 are as follows: ($ millions) 2017 2018 2019 2020 2021 Net income 1.0 2.0 3.2 3.7 4.0 Investment 1.0 1.0 1.2 1.4 1.4 Free cash flow 0 1.0 2.0 2.3 2.6 Phoenix’s recovery will be complete by 2021, and there will be no further growth in free cash flow. a= Calculate the PV of free cash flow, assuming a cost of equity of 9%. b= Assume that Phoenix has 12 million shares outstanding. What is the price per share? c=If the net income for 2016 is $1 million, what is Phoenix’s P/E ratio?
1. Company Y does not plow back any earnings and is expected to produce a level dividend stream of $5 a share. If
the current stock price is $40, what is the market capitalization rate? (Enter your answer as a percent rounded to 1 decimal place.)
Market capitalization rate = ?
2. Company Z-prime’s earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $10, the market capitalization rate is 8% and next year’s EPS is $15. What is Z-prime’s stock price?
stock price= ?
3.. Pharmecology just paid an annual dividend of $1.35 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 2.75% per year. The nominal cost of capital is 9.5%.
What is Pharmecology’s current stock price?
What would be Pharmecology’s current stock price using forecasted real dividends and a real discount rate?
4.
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2016 are as follows:
| ($ millions) | 2017 | 2018 | 2019 | 2020 | 2021 |
| Net income | 1.0 | 2.0 | 3.2 | 3.7 | 4.0 |
| Investment | 1.0 | 1.0 | 1.2 | 1.4 | 1.4 |
| Free cash flow | 0 | 1.0 | 2.0 | 2.3 | 2.6 |
Phoenix’s recovery will be complete by 2021, and there will be no further growth in free cash flow.
a= Calculate the PV of free cash flow, assuming a cost of equity of 9%.
b= Assume that Phoenix has 12 million shares outstanding. What is the price per share?
c=If the net income for 2016 is $1 million, what is Phoenix’s P/E ratio?
Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"
