1. Giggle Inc. pays no dividends now. An analyst expects that Giggle will pay the following dividends per share beginning in 2021:

Year 2021 2022 2023 2024

Dividends $10 $15 $22 $30

After 2024 dividends will grow annually by 5 percent forever. If investors expect a 15 percent annual return, can you find the value of one Giggle common share at the end of 2020?

2. You win a 5-year contract to be the sole supplier of hardware to a business. You project the following cash flows for the next 5 years:

1 2 3 4 5

-$10,000 $20,000 $25,000 $25,000 $25,000

Assuming a 7% required rate, what is the fair value of this contract now? Is this contract value enhancing if you paid $71,000 for the contract?

3. AT&T currently (in 2020) pays $2.08 in dividends per share. Next years (2021) dividends are expected to be $2.16 and the dividends are expected to grow at the same rate forever as the growth rate between 2020 and 2021. AT&Ts stock price today is $29.75. What rate of return are shareholders requiring, given the above information?

4. If I own 10 ITM shares and if 10 board members are to be elected, under cumulative voting I can cast a maximum of in favor of one nominee.

5. ITM pays a $0.90 per share dividend every quarter. For the current quarter, the holder-of-record date is Mon, May 4, 2020. What is the ex-dividend date?

6. If a perpetual preferred stock pays a $1.50 in dividend every year, what is the value of this stock assuming a required rate of 8%?

7. Energy Inc. is expected to pay a dividend of $3.20 per share next year and the dividend growth rate is expected to be 3%. How much is one Energy stock worth if the required rate is 11%?

Please use the following data for questions 8-12.

Year 1 2 3 4 5

$20,000 $32,000 $8,000 $2,000 $3,000

Initial Investment is $50,000

8. What is the projects payback period? Will you accept the project if the required payback period is 4 years?

9. What is the projects fair value or present value if you require a 20% return?

10. What is the projects NPV? Will you accept the project?

11. Explain why the above two techniques lead you to different decisions.

12. What is the projects IRR? Is the project acceptable if you require a 20% return?