If there are 70,000,000 shares outstanding, what is the impact on the market value of the firm?

 

Projections for a firm whose stock you wish to value:
		Years 1 - 7		Years 8 - 11		Years 12 - 24
EPS		2.35		4.92		7.04
Payout Ratio	0.24		0.34		0.54
Stock's beta is	0.9
YTM on T-bond is	4.6%
Stock premium is	5.0%
Discount the projected dividends at the required rate of return to estimate
the stock's value. Only use years 1-24 in your computations.
1. What is the stock's value?
A Between 15.00 and 23.00
B Between 23.00 and 27.00
C Between 27.00 and 31.00
D Between 31.00 and 40.00
2. Please go back to the original story. Suppose the stock becomes less risky
from an investor's view. For instance, suppose its beta is now 1.00
If there are 70,000,000 shares outstanding, what is the impact
on the market value of the firm? Hint: first find the new stock price,
then compute how it changed, and multiply that change by the
number of shares outstanding.
A up between 0 and 160,000,000
B up between 160,000,000 and 500,000,000
C down between 0 and 160,000,000
D down between 160,000,000 and 500,000,000
3. Please go back to the original story. Suppose recent financial
results suggest that average EPS projections will all be $ 0.02 more
than previously thought.
If there are 70,000,000 shares outstanding, what is the impact
on the market value of the firm? Hint: first find the new stock price,
then compute how it changed, and multiply that change by the
number of shares outstanding.
A up between 0 and 10,000,000
B up between 10,000,000 and 50,000,000
C down between 0 and 10,000,000
D down between 10,000,000 and 50,000,000