a document explaining the implications of your findings for the business or business transaction.

AutoSave 3 31 Homework Stock Valuati Calculatio Home Insert Draw Page Layout Formulas Data Review View 9 Tell me E Share E Comments E v A [@M 12 V A AV m E Conditional Formatting v E Insert v Z v 9? v p v ; $ V [E v m Format as Table v E Delete y L v . 4' ~ Paste 6 B I g v v Oi ,, A v $ ,, % , (08 438 Cell Styles v E Format v o v SFomrteorSi :32: Ideas Sensitivity K56 $ x v f3: v A B C D E F G H | J K L M N 0 P Q R S 1 Assignment 3-1, Question 1 l 2 3 1a. Calculate the value of the stock today: 4 5 6 1. Calculate the PV of the dividends paid during the supernatural growth period: 7 s s as S 9 1.15 x 1.15 = 1.32 10 1132 x 1.15 = 1.52 11 1.52 x 1.13 = 1.72 12 13 PV of Dividends = 1._32 + Q + m = $3.61 14 1.12 (1.12)"2 [1.12)'3 15 16 2. Find the PV of Turbo's stock price at the end of Vear 3: 17 18 Pa" = D4 = D;1+) 19 rs-g rs-g 20 G=.06% 21 = 1.72 1.06! RS=.12% 22 .12-.06 23 24 = $30.39 25 7 , , 7 26 7 27 W of P3" = 30.39 = $21.63 28 (1.12: 29 3O 31 31 Sum the two components to find the value of the stock today: 32 33 Value of current stock (PM) = $21.63 + $3.61 = $25.24 Frist year number 34 i 375 4 p 3-1 Question1 3-1 Question 2 3-1 Question 3 5-2 Question1 ' + l E -O+ 100% AutoSave OFF 3 3-1 Homework- Stock Valuation Calculations - Saved to my Mac Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Calibri (Body) v 12 A A ab v General Conditional Formatting Insert v = E V Format as Table Ex Delete v BIUV MVAv $ ~ % 9 Ideas Sensitivity Paste Cell Styles v Format v ) v Sort & Find & Filter Select K56 fx A B D E F G H I K L M N O P Q R 30 31 3. Sum the two components to find the value of the stock today: 32 33 Value of current stock (Po^) = $21.63 $3.61 = $25.24 Frist year number 34 35 36 37 38 1b. Calculate P1^ and P2^. 39 40 P1^ = 1.52 1.72 $30.39 $26.95 Second year number 41 1.12 (1.12)^2 (1.12)^2 42 43 P21= 1.72 $30.39 $28.67 $28.67 Third Year number 44 1.12 1.12 45 46 47 48 1c. Calculate the dividend yields and capital gains yield for Years 1, 2, and 3. 49 50 51 Year Dividend Yie Capital Gains Yield Total Return 52 1 $1.3225/25.24 =5.23% ($26.95- 25.24) / $25.24= 6.77% 12% 53 2 $1.5209/26.95= 5.64% ($28.67 - $26.95) / $26.95 = 6.36% 12% 54 13 $1.7186/28.67= 6.00% (30.39 - $28.67) / $28.67 = 6% 2 12 22 11 12% 55 56 57 58 59 60 61 62 63 3-1 Question 1 3-1 Question 2 3-1 Question 3 5-2 Question 1 + + 100%Q AutoSave OFF 3 3-1 Homework- Stock Valuation Calculations - Saved to my Mac Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Calibri (Body) v 12 A A = ab v General Conditional Formatting Insert v = E V Format as Table Ex Delete v Sort & Find & Ideas Sensitivity Paste BIUV MVAv $ ~ % 9 oo 30 Cell Styles v Format v ) v Filter Select B17 X V fx A B C D E F G H K L M N O P 1 Assignment 3-1, Question 2 AWNI 5 Annual dividend 5 Current price 50 Required rate of return of preferred stock = Annual dividend/ Current Price 8 Ips = 10% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 28 29 30 31 32 33 3-1 Question 1 3-1 Question 2 3-1 Question 3 5-2 Question 1 + + 100%AutoSave OFF 3 3-1 Homework- Stock Valuation Calculations - Saved to my Mac Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Calibri (Body) v 12 A A = = ab v General Conditional Formatting Insert v Format as Table Ex Delete v BIUVV MVAv $ ~ % 9 oo Format v Sort & Find & Ideas Sensitivity Paste i Cell Styles v ) v Filter Select K34 X V fx A B C D E F G H K L M N O P Q R 3a. Calculate Mccaffrey's value of operations. Vop = FCF(1+g) $100,000(1+0.07) 0.11 - 0.07 = $2,675,000 FCC= 100,000 WACC - 8 G=.07% Wacc=.11% 10 11 3b. Calculate the company's total value. 12 13 14 Total Value = Value of Operations + Value of nonoperating assets 15 16 = $2,675,000 $325,000 $3,000,000 17 18 19 20 3c. Calculate the estimated value of common equity. 21 22 23 Value of equity = Total value Value of debt 24 25 = $3,000,000 $1,000,000 = $2,000,000 26 27 28 29 3d. Calculate the estimated per share stock price. 30 31 32 Price per share = Value of Equity Number of Shares 33 34 = $2,000,000 $50,000 = $40 35 3-1 Question 1 3-1 Question 2 3-1 Question 3 5-2 Question 1 + + 100%AutoSave OFF 3 3-1 Homework- Stock Valuation Calculations - Saved to my Mac Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Calibri (Body) v 12 A A = = de v General Conditional Formatting Insert v E Format as Table Ex Delete v Paste BIUV MvAv $ ~ % " 0o -0 Cell Styles v Format v Sort & Find & Ideas Sensitivity Filter Select D2 X V fx B D E F G H K M N O P Q R S 1 Assignment 5-2, Question 1 OUT AWN Net Present Value (NPV): NPVx = -$10,000 $6,500 $3,000 $3,000 $1,000 (1.12)^1 (1.12)^2 (1.12)13 (1.12)^4 = $966.01 10 11 NPVy = 12 -$10,000 $3,500 $3,500 $3,500 $3,500 (1.12)^1 (1.12) ^2 (1.12)^3 (1.12)^4 = $630.72 13 14 15 Internal Rate of Return (IRR): 16 17 To solve for each project's IRR, find the discount rates that equate each NPV to zero: 18 19 IRRx 18.00% 20 IRRy 15.00% 21 22 23 Modified Internal Rate of Return (MIRR): 24 25 To obtain each project's MIRR, begin by finding each project's terminal value (TV) of cash inflows: 26 27 TVX $6,500 (1.12)^3 $3,000(1.12)^2 + $3,000(1.12)^1 + $1,000 $17,255.23 28 29 TVv $3,500(1.12) 13 $3,500(1.12)^2 + $3,500(1.12)^1 + $3,500 $16,727.65 30 31 Now, each project's MIRR is the discount rate that equates the PV of the TV to each project's cost, $10,000: 32 33 MIRRX 14.61% 34 MIRRy 13.73% 35 3-1 Question 1 3-1 Question 2 3-1 Question 3 5-2 Question 1 + + 100%AutoSave OFF 3 3-1 Homework- Stock Valuation Calculations - Saved to my Mac Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Calibri (Body) v 12 A A ab v General Conditional Formatting Insert v E = E V Format as Table Delete v Sort & Find & Ideas Sensitivity Paste BIUV MVA $ ~ % " oo Cell Styles v Format v Filter Select D2 X V fx R S A B C D m G H K M N P Q $6,500 (1.12)^3 + $3,000(1.12) ^2 + + O $17,255.23 27 TVX $3,000(1.12)^1 $1,000 28 29 TVy $3,500(1.12)^3 $3,500(1.12)^2 + $3,500(1.12)^1 $3,500 = $16,727.65 30 31 Now, each project's MIRR is the discount rate that equates the PV of the TV to each project's cost, $10,000: 32 33 MIRRX 14.61% 34 MIRRy 13.73% 35 36 37 Profitability Index (PI): 38 39 To obtain each project's PI, divide its present value of future cash flows by its initial cost. The PV of future cash flows can be found from the NPV calculated earlier: 40 41 PVx = NPVx Cost of X 42 $966.01 $10,000 $10,966.01 43 44 PVy NPVy Cost of Y 45 = $630.72 $10,000 $10,630.72 Plx 11 11 PVx Cost of X $10,966.01 $10,000 1.097 Ply II PVy Cost of Y $10,630.72 $10,000 1.063 58 59 60 61 3-1 Question 1 3-1 Question 2 3-1 Question 3 5-2 Question 1 + + 100%