4. Bigquiz is experiencing rapid growth. Dividends are expected to grow at 15% per year during the next three years. After that period, dividend will grow at 4% forever. Using two stage dividend discount model, how much is the stock price today? Comparing to market price, do you suggest to buy or sell the stock? 5. BigQuiz is considering to issue 50 million long-term debt to buy back its existing stocks. How many shares can be bought? Suppose the new debt has the same interest rate as the existing debt, how much will be EPS before and after the stock repurchase? List three reasons that firms may prefer stock repurchase to cash dividend. List another three reasons that firms may prefer cash dividend.

A B D E 1 4 less 6 less - Nm too O EN Income statement for the year ending 31dec 2020 Particular Amount(in millions) sales 610 cost of good sold 450 gross profit 160 =C3-C4 depreciation 100 EBIT 60 =C5-C6 intrest rate 10% on 150(long term debt) 15 EBT 45 =C7-C8 tax@20% 9 =C9*20% EAT 36 =C9-C10 dividend 50% of 36 18 =50%*C11 net income 18 =C11-C12 8 less 10 less 12 less F G H 1 J K L Add ROE for the year 2020 Opening bal 180 net income 2020 18 198 = 12+13 dividend 18 ROE 180 =14-15 less Amount 10 Liabilities Retained earing Account payble Common stock Longterm debts 28 Balance sheet as the 32/3/2020 Amount Assets 180 cash 25 Account receivable 60 Inventry 150 Net fixed Assets 415 =SUM(113:116) 32 345 415 =SUM(K13:K16) Bigquiz currently is an all-equity financed firm with the information given below. Bigquiz Corporation (in millions) ($ millions) 2019 2020 sales 610 cost of goods sold 450 depreciation 100 interest rate 10.0% payout 50.0% tax rate 20.0% account receivable 26 28 cash 20 inventory 28 32 net fixed asset 300 345 account payable 20 25 note payable 0 0 long-term debt 100 150 common stock 60 60 retained earning 180 shares outstanding 10 A B D E 1 4 less 6 less - Nm too O EN Income statement for the year ending 31dec 2020 Particular Amount(in millions) sales 610 cost of good sold 450 gross profit 160 =C3-C4 depreciation 100 EBIT 60 =C5-C6 intrest rate 10% on 150(long term debt) 15 EBT 45 =C7-C8 tax@20% 9 =C9*20% EAT 36 =C9-C10 dividend 50% of 36 18 =50%*C11 net income 18 =C11-C12 8 less 10 less 12 less F G H 1 J K L Add ROE for the year 2020 Opening bal 180 net income 2020 18 198 = 12+13 dividend 18 ROE 180 =14-15 less Amount 10 Liabilities Retained earing Account payble Common stock Longterm debts 28 Balance sheet as the 32/3/2020 Amount Assets 180 cash 25 Account receivable 60 Inventry 150 Net fixed Assets 415 =SUM(113:116) 32 345 415 =SUM(K13:K16) Bigquiz currently is an all-equity financed firm with the information given below. Bigquiz Corporation (in millions) ($ millions) 2019 2020 sales 610 cost of goods sold 450 depreciation 100 interest rate 10.0% payout 50.0% tax rate 20.0% account receivable 26 28 cash 20 inventory 28 32 net fixed asset 300 345 account payable 20 25 note payable 0 0 long-term debt 100 150 common stock 60 60 retained earning 180 shares outstanding 10