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(Solved) Need within 2 hours. Thank you. 1) Which of the following amounts is closest to what should be paid for Overland common stock?


Need within 2 hours. Thank you.



1) Which of the following amounts is closest to what should be paid for Overland common stock? Overland has just paid a dividend of $2.38. These dividends are expected to grow at a rate of 1.3% in the foreseeable future. The risk of this company suggests that future cash flows should be discounted at a rate of 9.3%. Show your answer to the nearest $.01. Do not use the $ sign in your answer.


2) You are offered an investment with returns of $ 2,720 in year 1, $ 3,626 in year 2, and $ 3,420 in year 3. The investment will cost you $ 6,312 today. If the appropriate Cost of Capital (quoted interest rate) is 12.5 %, what is the Profitability Index of the investment? Enter your answer to the nearest .01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.


3) You are considering the purchase of an investment that would pay you $21 per year for Years 1-4, $79 per year for Years 5-7, and $63 per year for Years 8-10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment? Show your answer to the nearest $.01. Do not use the $ sign in your answer.


4) Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 12 percent to evaluate average-risk projects, and it adds or subtracts 1 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 358 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 104 . Project B, of less than average risk, will produce cash flows of $ 310 at the end of Years 3 and 4 only. To the nearest .01, list the NPV of the higher NPV project. Note, if the NPV is negative, place a - sign in front of your answer. Do not use the $ symbol.


5) Which is the amount that should be paid for a stock that will pay a dividend of $5.93 in one year and $2.55 in two years? After that, the stock price will grow at a constant 5% per year forever.  The appropriate discount rate is 12%. Show your answer to the nearest $.01. Do not use the $ sign in your answer.


6) A firm has the following book-value balance sheet; Debt =$ 20 ,000, Common Stock ($1 par)= 5 and Retained Earnings = $ 28 ,000. The book value of assets is the total of Debt, Common Stock and Retained Earnings. The firm's bonds are currently selling at par and the firm's stock is currently selling for $ 23 . The firm's tax rate is 31 %. What is the value of the firm's tax shield (i.e. the change in firm value due to the use of leverage in the capital structure)? Show your answer to the nearest $1. Do not use commas or the $ sign in your answer.


7) Mills Mining is considering an expansion project. The proposed project has the following features. The project has an initial cost of $534--this is also the amount which can be depreciated using the following depreciation schedule: Year 1 is 33%, Year 2 is 45%, Year 3 is 15%, and Year 4 is 7%. If the project is undertaken, at t = 0 the company will need to increase its inventories by $93, and its accounts payable will rise by $59. This net operating working capital will be recovered at the end of the projects life (t = 4). If the project is undertaken, the company will realize an additional $681 in sales over each of the next four years (t = 1, 2, 3, 4). The company’s operating cost (not including depreciation) will equal $405 a year. The company’s tax rate is 40 percent. At t = 4, the projects economic life is complete, but it will have a salvage value of $91. The projects WACC = 10 percent. What are the one-time cash flows associated with ending the project (i.e. terminal Cash Flows)? Note, we only want terminal cash flows, not operating cash flows in the last year. Show your answer to the nearest $.01. Do not use the $ or , sign in your answer.


8) A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital. Cost of Debt = 5.0%, Tax rate = 40%, Current Stock Price = $27.46, Long Run Growth rate = 7.0%, Next Year's Dividend = $2.51. Show your answer to the nearest .1%. Do not use the % sign in your answer.  Enter your answer as a whole number, thus 9.2% would be 9.2 rather than .092 or 9.2%.

 


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