hected in the short run that for the next few years in the long run the store T-bonds) is 7, and that the required rate of return on the market is 12 What is a INTEGRATED CASE PINE INSURANCE ( GROUP) COMPANY OF CHINA LTD. STOCK VALUATION Roberts and Carol Teaser vice presidents An instance Company of China In Se's main posibility is fixed-in the securities primarily bonds and besponsible for equity investments A major new chants Hand his that Ping An Insurance presentan mement semar to the shareholdes and directors and To who will make the actual presentation here asked you to help them To illustrate the common stock valuto. Su and to have asked to meet Company amployment agency that supplies word procesor operators and computer program 3. What are the placations if a company car that wedstryd 368 10-23 b 1 2 businesses with temporarily for you. You are to answer the following questions Describe briefly the begal rights and privileges of communen stockholders Write a formula that can be used to value any stock, regardless of its dividend pattern What is a constant growth stock How are constant growth stocks valued? c d 1 1 Company's required rate of return? Assume that Batu Company is a constant growth company whose last dividend (D. which paid yesterday) was $2.00 and whose dividend is expected to grow indetinutely at a 6% tate What is the firm's expected dividend stream over the next 3 years! 2. What is its current stock price? 3. What is the stock's expected value 1 year from now? 4 What are the expected dividend yield, capital gains yield, and total return during the first Now assume that the stock is currently selling at $30.29. What is its expected rate of retum! What would the stock price be if its dividends were expected to have zero growth? Now assume that Bau Bau Company is expected to experience nonconstant growth of the next 3 years, then return to its long-run constant growth rate of 6" What is the stock's value unde these conditions? What are its expected dividend and capital gains yields in Year 17 Year! h. Suppose Bau Bau Company is expected to experience zero growth during the first 3 years and then resume its steady-state growth of 6% in the fourth year. What would be its value then? What we be its expected dividend and capital gains yields in Year 1? In Year 4? Finally, assume that Bau Bau Company's earnings and dividends are expected to decline constant rate of 6 per year, that is, 8 = -6%. Why would anyone be willing to buy such as and at what price should it sell? What would be its dividend and capital gains yields in cachy Suppose Bau Bau Company embarked on an aggressive expansion that requires additional capil Management decided to finance the expansion by borrowing 540 million and by halting dividend payments to increase retained carings. Its WACC is now 10%, and the projected free cash flow the next 3 years are -$5 million $10 million, and $20 million. After Year 3. free cash flow projected to grow at a constant o What is Bau Bau Company's total value? If it has 10 milik shares of stock and 10 million of debt and preferred stock combined, what is the price per star k Suppose Bau Bau Company decided to issue preferred stock that would pay an annual dividend of 55 and that the issue price was $50.00 per share. What would be the stocks expected retur? Wocido expected rate of return be the same if the preferred was a perpetual issue or it it had a 20-year matur 1 hected in the short run that for the next few years in the long run the store T-bonds) is 7, and that the required rate of return on the market is 12 What is a INTEGRATED CASE PINE INSURANCE ( GROUP) COMPANY OF CHINA LTD. STOCK VALUATION Roberts and Carol Teaser vice presidents An instance Company of China In Se's main posibility is fixed-in the securities primarily bonds and besponsible for equity investments A major new chants Hand his that Ping An Insurance presentan mement semar to the shareholdes and directors and To who will make the actual presentation here asked you to help them To illustrate the common stock valuto. Su and to have asked to meet Company amployment agency that supplies word procesor operators and computer program 3. What are the placations if a company car that wedstryd 368 10-23 b 1 2 businesses with temporarily for you. You are to answer the following questions Describe briefly the begal rights and privileges of communen stockholders Write a formula that can be used to value any stock, regardless of its dividend pattern What is a constant growth stock How are constant growth stocks valued? c d 1 1 Company's required rate of return? Assume that Batu Company is a constant growth company whose last dividend (D. which paid yesterday) was $2.00 and whose dividend is expected to grow indetinutely at a 6% tate What is the firm's expected dividend stream over the next 3 years! 2. What is its current stock price? 3. What is the stock's expected value 1 year from now? 4 What are the expected dividend yield, capital gains yield, and total return during the first Now assume that the stock is currently selling at $30.29. What is its expected rate of retum! What would the stock price be if its dividends were expected to have zero growth? Now assume that Bau Bau Company is expected to experience nonconstant growth of the next 3 years, then return to its long-run constant growth rate of 6" What is the stock's value unde these conditions? What are its expected dividend and capital gains yields in Year 17 Year! h. Suppose Bau Bau Company is expected to experience zero growth during the first 3 years and then resume its steady-state growth of 6% in the fourth year. What would be its value then? What we be its expected dividend and capital gains yields in Year 1? In Year 4? Finally, assume that Bau Bau Company's earnings and dividends are expected to decline constant rate of 6 per year, that is, 8 = -6%. Why would anyone be willing to buy such as and at what price should it sell? What would be its dividend and capital gains yields in cachy Suppose Bau Bau Company embarked on an aggressive expansion that requires additional capil Management decided to finance the expansion by borrowing 540 million and by halting dividend payments to increase retained carings. Its WACC is now 10%, and the projected free cash flow the next 3 years are -$5 million $10 million, and $20 million. After Year 3. free cash flow projected to grow at a constant o What is Bau Bau Company's total value? If it has 10 milik shares of stock and 10 million of debt and preferred stock combined, what is the price per star k Suppose Bau Bau Company decided to issue preferred stock that would pay an annual dividend of 55 and that the issue price was $50.00 per share. What would be the stocks expected retur? Wocido expected rate of return be the same if the preferred was a perpetual issue or it it had a 20-year matur 1