Valuing Stocks

Valuing Stocks 10. Stock Values: Integrated Potato Chips paid $1.00 per share dividend yesterday.You can expect the dividend to grow steadily at a rate of 4 percent per year. a. What is the expected dividend in each cash of the next 3 years? b. If the discount rate for the stock is 12 percent at what price will the stock sell? c. What is the expected stock price 3 years from now? d. If you buy the stock and plan to hold it for 3 years ,what payments will you receive? What is the percent value of those payments? Compare your answer to (b) 19. Constant growth Model. Here are data on two stocks ,both of which have discount rates of 15 percent: Return on equity Stock A 15% Stock B... click for more

MIRR

Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flow of $73,306 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12%. What is the project's MIRR? Please give step to step explanation for the answer.

Risk-adjusted NPV

Risk-adjusted NPV Real Time Systems Inc. is considering the development of one of two mutually exclusive new computer models. Each will require a net investment of $5000. the cash flow figures for each project are shown below: Period Project A Project B 1 $2,000 $3,000 2 $2,500 $2,600 3 $2,250 $2,900 Model B, which will use a new type of laser disk drive, is considered a high-risk project, which Model A is of average risk. Real Time adds 2 percentage points to arrive at a risk-adjusted cost of capital when evaluating a high-risk project. The cost of capital used for average-risk projects is 10%. What is the NPVs fo... click for more

MIRR

2.) Taylor Technologies has a target capital structure, which is 40% debt and 60% equity. The equity will be financed with retained earnings. The company’s bonds have a yield to maturity of 10%. The company’s stock has a beta=1.1. The risk-free rate is 6%, the market risk premium is 5%, and the tax rate is 30%. The company is considering a project with the following cash flows: (see chart in the attached file) What is the project’s modified internal rate of return (MIRR)?

Investment problem

Cochran Corporation has a weighted average cost of capital of 11% for projects of average risk. Projects of below-average risk have a cost of capital of 9%, while projects of above-average risk have a cost of capital equal to 13%. Projects A and B are mutually exclusive, whereas all other projects are independent. None of the projects will be repeated. The following table summarizes the cash flows, internal rate of return (IRR), and risk of each of the projects. (see chart in attached file) Which projects will the firm select for investment?