Description
Need help to solve these 23 Corporate finance questions. Please review and let me know if anyone can help...................................................................................................................................................................
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Explanation & Answer
Attached.
Surname 1
Name
Supervisor
Course
Date
MBA 6081 Unit 3 Homework 2018
1.
Solution
Expected dividend yield =
Expected dividend per share
Current price
=
2
= 0.2
10
=20%
Expected equity capital gain rate =
Expected stock price − Current price
Current price
=
23 − 10
10
=130%
Equity cost of capital = (Capital gain rate + Dividend yield)
= 130% + 20%
= 150%
2.
Surname 2
Solution
Dividend yield =
Dividend per share
Share price
=
1.19
20.76
5.73%
Cost of equity = Capital gain + Dividend yield
=
24.83 − 20.76
+ 5.73%
20.76
=25.34%
3.
Solution
Cost of capital = Dividend yield + Dividend growth rate
11% =
1.50
+ 6.0%
Share price
5% =
1.5
Share price
Share price =
=$30
4.
1.5
5%
Surname 3
Solution
Since the retention rate is 100%, for the next 2 years earnings will grow at 18.73% (expected
return *retention rate). Therefore, in the end of the 3rd years, earnings will be =(2.91*1.1873^2)
=$4.10. At that time, dividends will be $4.10*(1-0.48) =$2.13. In the next 2 subsequent years,
earnings will grow by (48%*18.73%)= 8.99%. Thus, at the end of the 5th years, earnings will be
4.10*1.0899^2=$4.87. The dividends for that period will be =$4.87*(1-20%) =$3.90. The
growth rate of divide...