1)A company just pulled off the turn-around of the century. It was recently nearly bankrupt, but today, it announced a $1 dividend to be paid one year from now. It is also expected that the dividend will increase by $1 per year for the following two years. After the third year (when the dividend is $3), dividend growth is expected to slow to 6 percent. If the firms investors expect a 14 percent return on this stock, what is the value?

2)A company projects a rate of return on new investment of 20 percent. Management plans to plowback 30 percent of all earnings into the firm. Earnings this year will be $3 per share and investors expect a 12 percent return on the stock.

What is the growth rate on the stock?

What is the stock price?

What is the present value of the growth opportunities?

What is the P/E ratio?

What would the price and P/E ratio of the firm be if it paid out all earnings as a dividend?

3)This company has 800, 9% coupon bonds, with a face value of $1,000, are outstanding with 25 years to maturity, and a quoted price of 108% of par. The bonds pay interest annually. The company also has 20,000 shares of common stock, with a par value of $20, selling at $75 per share. The stock has a beta of 1.1. Preferred stock, with a par value of $25, has a market value of $30 per share and pays a $3 dividend per year. There are currently 10,000 shares of preferred stock outstanding. If the market has an expected return of 13 percent and the current risk free rate is 6 percent. The current tax rate is 35 percent. Calculate the WACC.