14.) Stock Valuation - Moody Farms just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 3.8% per yar indefinitely. Investors require a return of 15% for the first three years, a return of 13% for the next three years, and a return of 11% theresafter. Strat is the current share price? Po - Po(1+a)) P = D. (1+9) year (1 + R) 15.) Nonconstant Growth - Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years becaue the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $17 per share 10 years from today and will increase the dividend by 3.9% per year thereafter. If the required return on this stock is 12.5%, what is the current share price? 8 9 0 1 16.) Nonconstant Dividends - Maurer, Inc., has an odd dividend policy. The company has just paid a dividend of $2.75 per share and has annouced that it will increase the dividend by $4.50 per share for each of the next five years and then never pay another dividend. If you require a return of 11% on the company's stock, how much will you pay for a share today? Year Cash Flow 0 -$82,000.00 (Initial investment) $40,000.00 2 -$21,000.00 3 $20,000.00 4 $30,000.00 5 -$10,000.00 6 $23,500.00 1. 2. What is the project's payback period? Will you accept the project if the required payback period is 7 years? What is the project's fair value if you require a 5% return? What is the project's NPV? Will you accept the project? Explain why the above two techniques give you different answers. What is the project's IRR? Will you accept this project? 3. 4. 5. MacBook Pro