3. As a financial analyst, you are tasked with finding the price per share of XYZ, a telecom company. (a) For this part, assume that the Gordon growth model for stock valuation holds. The typical company in the telecom industry has a ratio of next period's dividend to current price D1/Po = 2%, pays out 40% of earnings as dividends, and generates a return on equity of 15%. Your analysis suggests that the discount rate of the typical company in the telecom industry is appropriate to value XYZ's stock. What is this discount rate? 2 (b) For this part of the analysis, the discount rate is from part (a). You assume that the differential dividend growth approach (i.e., the two-stage DDM) can be used to correctly value XYZ's stock. XYZ just paid $2 per share in dividends. You estimate that dividends will grow at 20% for next four years until year 4, and then at 5% perpetually. Find the current price per share of XYZ.

A group of investors is intent on purchasing a publicly traded company and wants to estimate the highest price they can reasonably justify paying. The target company’s equity beta is 1.20 and its debt-to-firm value ratio, measured using market values, is 60 percent. The investors plan to improve the target’s cash flows and sell it for 12 times free cash flow in year five. Projected free cash flows and selling price are as follows.     ($ millions) Year 1 2 3 4 5 Free cash flows $38 $53 $58 $63 $ 63   Selling price         $ 756   Total free cash flows $38 $53 $58 $63 $ 819       To finance the purchase, the investors have negotiated a $530 million, five-year loan at 8 percent interest to be repaid in five equal payments at the end of each year, plus interest on the declining balance. This will be the only interest-bearing debt outstanding after the acquisition.   Selected Additional Information Tax rate 40 percent Risk-free interest rate 3 percent Market risk…

You are evaluating the stock of XYZ Corp. Suppose that the required rate of return for the firm is 20%. Suppose future dividends are expected to grow at 10% per year. The current stock price of the firm is $55. What is the expected dividend per share next year (D1)?   a. $4.5   b. $4.0   c. $5.0   d. $5.5

6. You are given the following information for ABC Inc.: (1) The risk-free rate is 5%. (2) The rate of return on the market is 8%. (3) The expected growth rate in dividends is 4%. (4) The last dividend paid was $0.80 per share.. (5) Beta is 1.0 a) What price should ABC sell for today? b) What price should ABC sell for, if the growth rate in dividends rise to 6% and beta increases to 1.5. I

You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.4, a debt-to-equity ratio of .4, and a tax rate of 21 percent. Assume a risk-free rate of 4 percent and a market risk premium of 8 percent. Lauryn's Doll Co. had EBIT last year of $41 million, which is net of a depreciation expense of $4.1 million. In addition, Lauryn's made $4 million in capital expenditures and increased net working capital by $2.0 million. Assume the FCF is expected to grow at a rate of 2 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) X Answer is complete but not entirely correct. Firm value $ 267.95 X million

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7%per year in the future. Shelby’s common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of thecurrent year.a. Using the discounted cash flow approach, what is its cost of equity?b. If the firm’s beta is 1.6, the risk-free rate is 9%, and the expected return on themarket is 13%, what will be the firm’s cost of equity using the CAPMapproach?c. If the firm’s bonds earn a return of 12%, what will rs be using the bond-yieldplus-risk-premium approach? (Hint: Use the midpoint of the risk premiumrange.)d. On the basis of the results of parts a through c, what would you estimateShelby’s cost of equity to be

I need help on this question ASAP: A start-up technology company has projected earnings per share of $4.50. If the average technology industry P/E ratio is 30, what would the company's projected stock price be?

suggests that an increase in the dividend growth rate will increase the value of a stock. However, an increase in the growth may require an increase in retained earnings and a reduction in the current dividend. Thus, management may be faced with a dilemma: current dividends versus future growth. As of now, investors’ required return is 9 percent. The current dividend is $1.3 a share and is expected to grow annually by 4 percent, so the current market price of the stock is $27.04. Management may make an investment that will increase the firm’s growth rate to 5 percent, but the investment will require an increase in retained earnings, so the firm’s dividend must be cut to $0.9 a share. Should management make the investment and reduce the dividend? Round your answer to the nearest cent. The value of the stock  to $   , so the management  make the investment and decrease the dividend.

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2.  The Hall Dental Supply Company sells at $32 per share, and Randy Hall, the CEO of this well-known Research Triangle firm, estimates the latest 12-month earnings are $4 per share with a dividend payout of 50%. Hall's earnings estimates are very accurate. a.  What is Hall's current P/E ratio? b.  If an investor expects earnings to grow by 10% a year, what is the projected price for next year if the P/E ratio remains unchanged? c.  Ray Parker, President of Hall Dental Supply Company, analyzes the data and estimates that the payout ratio will remain the same. Assume the expected growth rate of dividends is 10% and an investor has a required rate of return of 16%. Explain whether or not this stock would be a good buy and support your rationale. d.  If interest rates are expected to decline, discuss the likely effect on Hall's P/E ratio.