Hey,

I have an assignment from my advanced finance course. Can you please take a look.

STOCK VALUATION Deliverables: 1. An MSWord document or MSExcel worksheet containing the answers to the questions below. Your document should include your name in the text as well as a neat and professional set of answers. Purpose: To provide specific practice in computing the estimated value of a share of stock in a company using a commonly applied method. The model employed will be a multistage growth model of dividends (for parts a-c), and the related 'corporate valuation model' for part d. Done completely, this assignment will also help develop very useful skills in MSExcel for those who do not already have them. Here are the facts for parts a. - c. of this assignment. (The facts for part d. are different. See below.) Gwynt Industries, Inc. (GII) has been growing at a rate of 25% per year recently and its dividends have grown at the same rate. This high growth rate is expected to continue for the next 3 years, and then decline to a constant growth rate of 9% in all subsequent years. a. If D0 = $2.50 per share (i.e., the dividend just paid) and GII's required rate of return on equity is 13%, what is the value of a share of GII's stock worth today according to the 2-stage dividend growth model? What is its expected dividend yield this year, and what is its expected capital gains yield this year? b. Now assume that GII's period of 25% growth is to last for 6 years, i.e., what would be its stock price today and what would be its expected dividend and capital gains yields for this year? Assume that the required rate of return on equity is still 13%. c. What will GII's dividend yield and capital gains yield be every year once its period of high growth is past, i.e., once it reaches its long term constant growth rate? d. In this question we suppose that GII does not pay dividends - so the stock must be valued using a model that does not rely on dividends (so ignore the facts from parts a-c above). Based on GII's recent success and anticipated future success, analysts have projected the following amounts for GII's Cash Flows from its Assets CF(A) (i.e., for CF(A) = OCF - NWC - Capital Expenditures): [Note: this is sometimes referred to as 'Free Cash Flow' because it is the amount of cash available after required investments have been made in working capital and fixed assets, i.e., it is the amount of cash that should go to the investors (both debt and equity). See Module 3.] Year 1 2 3 4 5 6 7 8 CF(A) $9.5M $14.5M $22.6M $35.2M $49.8M $63.5M $72.3M $80.0M After the 8th year, GII's analysts estimate that Cash Flow from its Assets will grow at the constant rate of 7%. Suppose that GII's weighted average cost of capital (debt + equity) is 12%. Further suppose that the value of GII's debt is $200M, it does not have any preferred stock, and it has 11 million shares of common stock outstanding. What is the value of a share of GII's stock, based on the corporate valuation model