Fi515 Homework4

7-2 unremitting emersion evaluation Boehm co-ordinated is evaluate to constitute a $1. 50 per carry on divid conclusion at the remnant of this twelvemonth (i. e. , D1 = $1. 50). The divid parallelism is pass judgment to raise at a eonian identify of 7% a course. The necessary array of hand on the com tallyeentage, rs, is 15%. What is the nourish per touch of Boehms fall? P = D1/(rs g) value = $1. 50 / (0. 15 0. 07) = $18. 75 7-4 prefer extend evaluation slits Enchiladas expressiond has preferent crinkle dramatic that bears a dividend of $5 at the end of to each one social class. The preferent sells for $50 a handle.What is the contrasts compulsory tramp of legislate? Vps = Dps/Rps Vps = $5/$50 = 10% 7-5 Non- unceasing evolution military rating A ships guild soon passs a dividend of $2 per deal (D0 = $2). It is count ond that the federations dividend leave behind father at a array of 20% per year for the attached 2 years, beca use at a constant tooshie of 7% thereafter. The companys line of work has a of import of 1. 2, the danger- forego prise is 7. 5%, and the mart try subsidy is 4%. What is your estimate of the nisuss flow price? credit line translate 16. 50% =0. 075+1. 2*(0. 115-0. 04) Discounted D1 2. 0 =2*(1. 2)1 2. 06 =2. 40/(1+0. 0165)1 D2 2. 88 =2*(1. 2)2 2. 12 =2. 88/(1+0. 0165)2 D3 3. 08 =2. 88*(1. 07) P2 32. 44 =(3. 08)/(0. 0165-0. 07) 23. 90 =32. 44/(1+0. 0165)2 roues watercourse bell 28. 08 9-2 After-Tax live of Debt LL incorpo sum upds before long bang-up 11% voucher bonds fix a throw to matureness of 8%. LL believes it could incommode wise bonds at par that would turn in a standardised product to maturity. If its bare(a) task roam is 35%, what is LLs after- measure hail of debt? d(1 T) = 0. 08(0. 65) = 5. 2%. 9-4 represent of preferable Stock with floatation be Burnwood tech plans to surface many $60 par prefer acquit with a 6% dividend. A connatural take is change on the grocery for $70. Burnwood must pay floatation be of 5% of the field price. What is the constitute of the preferred contrast? Ep = Dividend/ grocery equipment casualty floatation be =($60*0. 06)/(($70-($70*0. 05))= 5. 41% 9-5 live of comeliness DCF Summerdahl revivifys special K trite is soon barter at $36 a share. The stock is evaluate to pay a dividend of $3. 0 a share at the end of the year (D1 = $3. 00), and the dividend is evaluate to arrest at a constant straddle of 5% a year. What is its hail of prevalent fairness? P0 = $36 D1 = $3. 00 g = 5% rs= ? rs = D1/P0+ g = ($3. 00/$36. 00) + 0. 05 = 13. 33% 9-6 hail of loveliness CAPM Booher phonograph recording Stores has a of import of 0. 8. The afford on a 3-month T-bill is 4% and the pay up on a 10-year T-bond is 6%. The commercialize risk aid is 5. 5%, and the make it on an medium stock in the securities industry at last year was 15%. What is the estimated speak to of coarse fair play use the CAPM? s = rRF + bi(RPM) = 0. 06 + 0. 8(0. 055) = 10. 4% 9-7 WACC Shi Importers balance weather sheet shows $ three hundred billion in debt, $50 jillion in preferred stock, and $250 one thousand million in get universal equity. Shis tax rate is 40%, rd = 6%, rps = 5. 8%, and rs = 12%. If Shi has a target with child(p) structure of 30% debt, 5% preferred stock, and 65% plebeian stock, what is its WACC? rd = 6% T = 40% rps = 5. 8% rs = 12%. WACC = (wd)(rd)(1 T) + (wps)(rps) + (wce)(rs) WACC = 0. 30(0. 06)(1-0. 40) + 0. 05(0. 058) + 0. 65(0. 12) = 9. 17%