3 accounting problems are in the attachent. Thank you.

MGMT 2620 - Chapter 11 Problem Set P1. SND operates in the energy sector. Assume that during the past three years (2014, 2015, and 2016), SND generated the following total dividends to its common equity shareholders (amounts are in millions). Year Common dividend payments Stock repurchases Total 2014 679 671 1,350 2015 750 366 1,116 2016 793 298 1,091 Assuming 5% growth in earnings and 5% concurrent growth in dividends for next five years, the following table presents the projected total dividends to the common equity shareholders (amounts are in millions). Projected growth Projected dividends to common equity Year + 1 5% $1,146 Year + 2 5% $1,203 Year + 3 5% $1,263 Year + 4 5% $1,326 Year + 5 5% $1,392 Year + 6 3% $1,434 In Year+6 and beyond, the total dividends (as well as income statement and balance sheet) are expected to grow at long-term rate of 3%. Dividends for Year+6 are already calculated in the above table. Following are the additional assumptions at the start of Year + 1: 1. 2. 3. 4. 5. SND's market beta is 0.8. Risk free rate is 3.0% Market's risk premium is 6.0% Number SND shares are 400 million Share price : $28.56 Please answer the following questions: a. Calculate the required rate of return on equity as of beginning Year + 1 b. Calculate the sum of the present value of total dividends for 5 years (Year+1 through Year+5). c. Calculate the continuing value at the start of year + 6 using the perpetuity-with-growth model using the year+6 dividends provided in the above table. Calculate the present value of continuing value as of the start of Year + 1. d. Compute the total present value as of start of Year + 1. Apply the adjustment for midyear discounting. e. Compute the value per share as of beginning of Year+1 f. Do you think the share price of SND is overpriced, underpriced, or correctly priced at the start of Year + 1? P2. PrivEq operates in electrics industry. PrivEq made the projections for next five years with three different scenarios of assumptions at the beginning of Year 1. The following table shows the actual values for Year 0 and projections for Year 1 to Year 5 (amounts in thousands). Actual Year 0 Year 2 Projected Year 3 Year 1 Year 4 Year 5 Scenario 1 Net Income Common Equity $19,325 $69,010 $18,553 $87,563 $15,403 $102,966 $21,667 $124,633 $33,966 $158,599 $48,830 $207,429 Scenario 2 Net Income Common Equity $19,325 $69,010 $16,918 $85,928 $9,305 $95,233 $9,112 $104,345 $13,670 $118,015 $18,747 $136,762 Scenario 3 Net Income Common Equity $19,325 $69,010 $16,033 $85,043 $2,350 $87,393 ($4,988) $82,405 ($7,290) $75,115 ($9,645) $65,470 PrivEq is not publicly traded and therefore does not have a market equity beta. Based on the PrivEq's products, its debt structure and its income tax rate, the cost of equity has been calculated as 12.4%. Questions: a. Use the clean surplus accounting approach to derive the projected total amount of PrivEq's dividends to common equity shareholders in Years 1 through 5. b. Assume that the PrivEq's value at the end of Year 5 is same as its book value at end of Year 5. Calculate the present value of the firm at the start of Year 1 for all the three scenarios. c. Given these amounts projected for three scenarios, what would be one another parameter that could help in estimating the intrinsic value of PrivEq? P3. Following table shows the actual amounts for year 2016 and projections for next 5 years of the firm KNJ (amounts are in millions). Comprehensive Income Common shareholders' equity Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Common Equity Actual 2016 $3,100 Projected Year + 1 Year + 2 Year + 3 Year + 4 $2,944 $3,069 $3,199 $3,335 Year + 5 $3,475 $659 $12,163 ($100) $694 $714 $12,604 $12,837 ($100) ($100) $732 $12,989 ($100) $749 $13,036 ($100) $764 $12,977 ($100) $12,722 $13,198 $13,451 $13,621 $13,685 $13,641 Assume the following at beginning of Year + 1 for KNJ: 1. 2. 3. 4. Market equity beta for KNJ is 1.00 Risk free interest rate is 3.0% and market risk premium is 6.00%. KNJ has 500 million outstanding shares and is trading at $71 per share. KNJ's outstanding interest bearing debt is $8,200 million. Assume that the market value of the debt is also $8,200 million. The interest rate is 4.0%. 5. There are no preferred stocks. 6. KNJ has $940 million in equity capital from non-controlling interests. The required rate of return for the non-controlling interests is 15%. 7. The average tax rate is 30% Questions: a. Use CAPM to compute the required rate of return on common equity capital. b. Compute the weighted-average cost of capital c. Use the clean surplus accounting approach to derive the projected dividends for common shareholders for Year + 1 through Year + 5 based on comprehensive income and shareholders' equity. Throughout this problem, you can ignore the dividends to the noncontrolling interests. d. Use the clean surplus accounting approach to project the continuing dividends for common shareholders in Year + 6. Assume that the steady-state long-run growth rate will be 3% in Year+6 and beyond. e. Using the required rate of return on common equity as discount rate, calculate the present value of the dividends for years Year + 1 through Year + 5. f. Using the required rate of return on common equity as discount rate and long-run growth rate of 3%, calculate the present value of continuing value of KNJ as of the start of Year + 1. g. Compute the value of share of common stock (Compute the sum of present value of dividends for Year + 1 through Year + 5 and present value of continuing value, apply midyear discounting adjustment, and calculate per share value). h. Using the same assumptions made earlier, re-compute the KNJ share value for the two following scenarios: a. Scenario 1: Long-run growth rate as 2% (not 3% as before) and assume that the required rate of return on equity is 1 percentage point higher than the one calculated in question (a). b. Scenario 2: Long run growth rate as 4% (not 3% as before) and assume that the required rate of return on equity is 1 percentage point lower than the one calculated in question (a). i. Do you recommend buy or sell of KNJ share based on the current price and the value range calculated above