Announcements Due No Due Date Points 50 Submitting a text entry box or a file upload NU Grades People Modules Google Drive Office 365 Conferences Course Evaluation F18 Chapter 7 discusses types of stock and stock valuation. Use this formatted Excel spreadsheet to answer questions on the scenarios below. (Add information from the scenario into the Input Data section and then refer to Key Outputs section of the spreadsheet for answers to the posed questions. Percentages need to be entered in decimal format, for instance 3% would be entered as 03.) Click Submit Assigrument to type in the answer the following scenarios: 1. Microweb Company has never paid a dividend. But, this year, the company expects to pay a dividend equal to $2.50 per share, and it plans to continue paying this same dividend for the following two years (a total of three years). After the $2.50 dividend is paid at the end of Year 3 (ie, beginning in Year 4), the company expects the dividend to grow at a normal (constant) 3% growth rate, and this growth rate will continue indefinitely (there is no nonconstant growth expected). If investors require a 14% rate of return to purchase the company's common stock, what should be the market value of Microweb's stock today (current price)? What would the market value (price) be at the end of Year 3? 2. Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period). When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year constant) indefinitely, Stockholders require a return of 12% on Ultimate's stock. The firm's most recent annual dividend (Dol, which was paid yesterday, was $1.75 per share. What is the current price (Pol of the stock today? What is the market value (price) at the end of Years? 3. Consider the scenario in question 2, what is the dividend yield in Year 1 and Year 5? What is the expected capital gains yield in Year 1 and Year 5? What is the expected total return (dividend yield plus capital gains yield) for Year 1 and Year 5? 4. Consider the scenario in Question 2 and suppose your boss believes that Ultimate's annual nonconstant growth rate will only be 12% during the next five years and that the firm's normal growth rate will only be 4%. Under these conditions, what is the current price of Ultimate's stock? What is the price at the end of Year 5? 5. Consider the scenario in Question and suppose your boss regards Ultimate as being quite risky; therefore, your boss believes that the required rate of return should be higher than the 12% originally specified. What is the current price of the stock, if the required rate of return is 13%? 15%? 20%? What is the effect of the higher required rates of return on Ultimate's stock price? Announcements Due No Due Date Points 50 Submitting a text entry box or a file upload NU Grades People Modules Google Drive Office 365 Conferences Course Evaluation F18 Chapter 7 discusses types of stock and stock valuation. Use this formatted Excel spreadsheet to answer questions on the scenarios below. (Add information from the scenario into the Input Data section and then refer to Key Outputs section of the spreadsheet for answers to the posed questions. Percentages need to be entered in decimal format, for instance 3% would be entered as 03.) Click Submit Assigrument to type in the answer the following scenarios: 1. Microweb Company has never paid a dividend. But, this year, the company expects to pay a dividend equal to $2.50 per share, and it plans to continue paying this same dividend for the following two years (a total of three years). After the $2.50 dividend is paid at the end of Year 3 (ie, beginning in Year 4), the company expects the dividend to grow at a normal (constant) 3% growth rate, and this growth rate will continue indefinitely (there is no nonconstant growth expected). If investors require a 14% rate of return to purchase the company's common stock, what should be the market value of Microweb's stock today (current price)? What would the market value (price) be at the end of Year 3? 2. Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period). When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year constant) indefinitely, Stockholders require a return of 12% on Ultimate's stock. The firm's most recent annual dividend (Dol, which was paid yesterday, was $1.75 per share. What is the current price (Pol of the stock today? What is the market value (price) at the end of Years? 3. Consider the scenario in question 2, what is the dividend yield in Year 1 and Year 5? What is the expected capital gains yield in Year 1 and Year 5? What is the expected total return (dividend yield plus capital gains yield) for Year 1 and Year 5? 4. Consider the scenario in Question 2 and suppose your boss believes that Ultimate's annual nonconstant growth rate will only be 12% during the next five years and that the firm's normal growth rate will only be 4%. Under these conditions, what is the current price of Ultimate's stock? What is the price at the end of Year 5? 5. Consider the scenario in Question and suppose your boss regards Ultimate as being quite risky; therefore, your boss believes that the required rate of return should be higher than the 12% originally specified. What is the current price of the stock, if the required rate of return is 13%? 15%? 20%? What is the effect of the higher required rates of return on Ultimate's stock price