FIN 381 Homework on Chapters 8 and 9 1. Giggle Inc. pays no dividends now. An analyst expects that Giggle will pay the following dividends per share beginning in 2021: Year 2021 2022 2023 2024 Dividends $10 $15 $22 $30 After 2024 dividends will grow annually by 5 percent forever. If investors expect a 14 percent annual return, can you find the value of one Giggle common share at the end of 2020? 2. You win a 5-year contract to be the sole supplier of hardware to a business. You project the following cash flows for the next 5 years: 1 -$10,000 2 $20,000 3 $25,000 4 $25,000 5 $25,000 Assuming a 6% required rate, what is the fair value of this contract now? Is this contract value- enhancing if you paid $71,000 for the contract? 3. AT&T currently in 2020) pays $2.08 in dividends per share. Next year's (2021) dividends are expected to be $2.16 and the dividends are expected to grow at the same rate forever as the growth rate between 2020 and 2021. AT&T's stock price today is $29.75. What rate of return are shareholders requiring, given the above information? Use the following information for questions 4-8. Year Cash Flow 0 -$82,000.00 (Initial investment) 1 $40,000.00 2 -$21,000.00 3 $20,000.00 $30,000.00 5 -$10,000.00 6 $23,500.00 4 4. What is the project's payback period? Will you accept the project if the required payback period is 7 years? 5. What is the project's fair value if you require a 5% return? 6. What is the project's NPV? Will you accept the project? Explain your answer. 7. Explain why the above two techniques give you different answers. 8. What is the project's IRR? Will you accept this project? Explain your answer. glish (US)