1.If early 2017 you bought a stock that is expected to pay a dividend of $4 by the end of 2017, the dividend is expected to grow at a constant growth rate of 1% hence after. What was the value of this stock in early 2017 according to the dividend discount model (DDM) if the discount rate was 8%? 2.A firm has an expected free cash flow of $3,610,864 by the end of 2018 that is expected to be constant at this level beyond this year forever. If its cost of capital is 7%, what is the value of this firm by the end of 2018? 3. By the early of 2016, a firm had a book value per share (BPS) of $79, a ROCE of 17% for 2016. If the required return is 11%, what is the Residual earnings for 2016? 4.A project has an initial cost of $1,000,000 and is expected to last for 2 years. In year 1, depreciation charge will be $100,000 and earnings are expected to be $108,463. In year 2, depreciation will be $100,000 and earnings are expected to be $209,998. Assume the required return is 9%. What is the value of this project? 5.A stock trades for $89 has a book value per share of $22, analysts' EPS forecast for year 1 is $11. The required return is 10%. What is the speculative value implied by the observed market price?
This question was answered on: May 23, 2022
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