1. (Il points) Candinn Corporation has existing assets that gmerate yourly earnings of $700.000+ XYZx$1,000, which are expectail to main content of the film does not invest in new projects. The company has 100.000 shares of common stock outstanding. Its all-equily licenced and its stuck 1188 s vela of 1.5. You esticate le market risk pureenius to be 7% and we rick Cree rale to be 25% The company hns two lines of husiness regnised as the divisions, A and 1). One year from now. Division A has the opportunity to invest $3 per here to launch new prodecs which will increase company's earning Der Share by $0.75 per war permanently starting the year after the investilet. The caruing tua tais pouduct acelictly satile, with all al sandard deviation to be 50% or a cutreie w lle market w by 0.2. The markel's claulard deviation is 20% ale: XYZ wlers to the last three days of our sint number of crumie feit thrwyde of sientaminer ore 72 the come the presence (a) 12 points) Asuni limoes wol platto uudetake the invecent gportunity of Division A, inswer the following: 1. What is the cast of capital for the company's existing assets? is. What is the stock price and the paren-to-carings ratio At time mo? ID) (2 points) What is the appropriate discount rate for the new product? Explain your ALL feliz points) What would be the stock peis and the price toamnings ratio at time sera if the film's Tivision du plan to launch the new product? How much of sucks value is attributable to youth upport! id) (2 points) me that after insig in Division A's project the company comes is now thnology that can improve Division D's profitability. Investment in the new technology would take place in two years from now. It would be inter- na ly founded and revine 70% of eating that year. The technolors would increase camnings per ahas in the two years following the investment by 33.0 and $4.3, spectively. Budou its amount of spatumatic rizk, Divisius B's investibut z 2 sissy as Division A's project Sbould tle ULUSLY'S ILaagent invest in tluis new technogy? Explain. le) i3 pointe) True ce False A Level explanatica of your sewer le required No pointe given if no explanation provided. These troefale etices se rate from parts lal-d above). 1. If expexceed your le that's good news for inwests, an that means stack pe must risc h. Caumon bonds sa mi to mortgages in that interest the com) is paid on the declining balance of the outstanding principal of the bord. 2 of 4 1. (Il points) Candinn Corporation has existing assets that gmerate yourly earnings of $700.000+ XYZx$1,000, which are expectail to main content of the film does not invest in new projects. The company has 100.000 shares of common stock outstanding. Its all-equily licenced and its stuck 1188 s vela of 1.5. You esticate le market risk pureenius to be 7% and we rick Cree rale to be 25% The company hns two lines of husiness regnised as the divisions, A and 1). One year from now. Division A has the opportunity to invest $3 per here to launch new prodecs which will increase company's earning Der Share by $0.75 per war permanently starting the year after the investilet. The caruing tua tais pouduct acelictly satile, with all al sandard deviation to be 50% or a cutreie w lle market w by 0.2. The markel's claulard deviation is 20% ale: XYZ wlers to the last three days of our sint number of crumie feit thrwyde of sientaminer ore 72 the come the presence (a) 12 points) Asuni limoes wol platto uudetake the invecent gportunity of Division A, inswer the following: 1. What is the cast of capital for the company's existing assets? is. What is the stock price and the paren-to-carings ratio At time mo? ID) (2 points) What is the appropriate discount rate for the new product? Explain your ALL feliz points) What would be the stock peis and the price toamnings ratio at time sera if the film's Tivision du plan to launch the new product? How much of sucks value is attributable to youth upport! id) (2 points) me that after insig in Division A's project the company comes is now thnology that can improve Division D's profitability. Investment in the new technology would take place in two years from now. It would be inter- na ly founded and revine 70% of eating that year. The technolors would increase camnings per ahas in the two years following the investment by 33.0 and $4.3, spectively. Budou its amount of spatumatic rizk, Divisius B's investibut z 2 sissy as Division A's project Sbould tle ULUSLY'S ILaagent invest in tluis new technogy? Explain. le) i3 pointe) True ce False A Level explanatica of your sewer le required No pointe given if no explanation provided. These troefale etices se rate from parts lal-d above). 1. If expexceed your le that's good news for inwests, an that means stack pe must risc h. Caumon bonds sa mi to mortgages in that interest the com) is paid on the declining balance of the outstanding principal of the bord. 2 of 4
