Hello,

Can you please help me solve 1b and 1c for the question 3.1?

I am not sure what values to use for calculating P1^ and P2^ and I need those to do 1c.

Thanks!

Assignment 3-1, Question 1 1a. Calculate the value of the stock today: 1. Calculate the PV of the dividends paid during the supernatural growth period: $ 1.15 1.32 1.52 D1 = D2 = D3 = PV of Dividends = % 1.15 1.15 1.13 x x x 1.32 1.12 + = = = 1.52 (1.12)^2 2. Find the PV of Turbo's stock price at the end of Year 3: P3 ^ = ____D4____ rs-g = = = __ _D3(1+g)______ rs-g 1.72(1.06) .12-.06 $30.39 PV of P3^ = 30.39 (1.12)^3 = $21.71 3. Sum the two components to find the value of the stock today: Value of current stock (P0^) = $21.71 + 1b. Calculate P1^ and P2^. P1 ^ = 1.52 + 1.72 + 1.12 P2 ^ = (1.12)^2 GGG + PPP 1.12 = 1.12 1c. Calculate the dividend yields and capital gains yield for Years 1, 2, and 3. Year 1 2 3 Dividend Yield $1.3225/MMM ??? $1.5209/NNN ???? $1.7186/UUU ???? + + + + natural growth period: $ 1.32 1.52 1.72 + 1.72 (1.12)^3 = $3.63 G=.06% RS=.12% $3.63 PPP = = $25.34 NNN Frist year number Second year number (1.12)^2 UUU UUU Capital Gains Yield ($26.93 - $MMM) / $MMM ??? ($28.64 - $NNN) / $NNN NNN (30.36 - $UUU) / $UUU ???% Third Year number = Total Return 12% 12% 12% Assignment 3-1, Question 2 rps = SSS Assignment 3-1, Question 3 3a. Calculate McCaffrey's value of operations. Vop = FCF(1+g) WACC - g = $100,000(1+0.07) 0.11 - 0.07 + Value of nonoperating asse + $325,000 3b. Calculate the company's total value. Total Value = Value of Operations = KKK 3c. Calculate the estimated value of common equity. Value of equity = Total value = RRR - Value of debt $1,000,000 3d. Calculate the estimated per share stock price. Price per share = Value of Equity = AAA Number of Shares $50,000 $100,000(1+0.07) 0.11 - 0.07 = KKK lue of nonoperating assets 325,000 = RRR = AAA = VVV Value of debt 1,000,000 Number of Shares 50,000 FCC= 100,000 G=.07% Wacc=.11% Assignment 5-2, Question 1 Solutions Provided for your education and learning, DR ED Please study them if you wish. DR ED a. Net Present Value (NPV): NPVx = NPVy = -$10,000 + $6,500 (1.12)^1 -$10,000 + $3,500 (1.12)^1 Internal Rate of Return (IRR): To solve for each project's IRR, find the discount rates that equate each NPV to ze IRRx IRRy = = 18.00% 15.00% Modified Internal Rate of Return (MIRR): To obtain each project's MIRR, begin by finding each project's terminal value (TV) of cas TVx = $6,500 (1.12)^3 TVy = $3,500(1.12)^3 Now, each project's MIRR is the discount rate that equates the PV of the TV to each proj MIRRx MIRRy = = 14.61% 13.73% Profitability Index (PI): To obtain each project's PI, divide its present value of future cash flows by its initial cost PVx = = NPVx = = NPVy PIx = = PVx $10,966.01 PIy = = PVy $10,630.72 PVy $966.01 + + $630.72 + + earning, DR ED + $3,000 (1.12)^2 + $3,000 (1.12)^3 + $1,000 (1.12)^4 = + $3,500 (1.12)^2 + $3,500 (1.12)^3 + $3,500 (1.12)^4 = es that equate each NPV to zero: ect's terminal value (TV) of cash inflows: + $3,000(1.12)^2 + $3,000(1.12)^1 + + $3,500(1.12)^2 + $3,500(1.12)^1 + s the PV of the TV to each project's cost, $10,000: ure cash flows by its initial cost. The PV of future cash flows can be found from the NPV calculated earlier: Cost of X $10,000 = $10,966.01 Cost of Y $10,000 = $10,630.72 Cost of X $10,000 = 1.097 Cost of Y $10,000 = 1.063 $966.01 $630.72 earlier: $1,000 = $17,255.23 $3,500 = $16,727.65