PLEASE SHOW ALL WORKING AND FORMULAS SO I CAN STUDY THE FORMULAS.

7-1 Thress Industries just paid a dividend of $1.50 a share (i.e., D0 = $1.50). The dividend is

expected to grow 5% a year for the next 3 years and then 10% a year thereafter. What is

the expected dividend per share for each of the next 5 years?

7-2Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year

(i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 6% a year. The

required rate of return on the stock, rs, is 13%. What is the estimated value per share of

Boehms stock?

7-3Woidtke Manufacturings stock currently sells for $22 a share. The stock just paid a

dividend of $1.20 a share (i.e., D0 = $1.20), and the dividend is expected to grow forever at

a constant rate of 10% a year. What stock price is expected 1 year from now? What is the

estimated required rate of return on Woidtkes stock (assume the market is in equilibrium

with the required return equal to the expected return)?

7-4Nicks Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5

at the end of each year. The preferred sells for $50 a share. What is the stocks required

rate of return (assume the market is in equilibrium with the required return equal to the

expected return)?

7-6EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is

expected to grow at a constant rate of 5%. The weighted average cost of capital is

WACC = 12%. Calculate EMCs estimated value of operations.

7-10 What is the required rate of return on a preferred stock with a $50 par value, a stated

annual dividend of 7% of par, and a current market price of (a) $30, (b) $40, (c) $50, and

(d) $70 (assume the market is in equilibrium with the required return equal to the

expected return)?

9-2 LL Incorporateds currently outstanding 11% coupon bonds have a yield to maturity of

8%. LL believes it could issue new bonds at par that would provide a similar yield to

maturity. If its marginal tax rate is 35%, what is LLs after-tax cost of debt?

9-5Summerdahl Resorts common stock is currently trading at $36 a share. The stock is

expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00), and the

dividend is expected to grow at a constant rate of 5% a year. What is its cost of common

equity?

On January 1, the total market value of the Tysseland Company was $60 million. During

the year, the company plans to raise and invest $30 million in new projects. The firms

present market value capital structure, shown below, is considered to be optimal. There is

no short-term debt.

Debt $30,000,000

Common equity 30,000,000

Total capital $60,000,000

New bonds will have an 8% coupon rate, and they will be sold at par. Common stock is

currently selling at $30 a share. The stockholders required rate of return is estimated to be

12%, consisting of a dividend yield of 4% and an expected constant growth rate of 8%.

(The next expected dividend is $1.20, so the dividend yield is $1.20/$30 = 4%.) The

marginal tax rate is 40%.

a. In order to maintain the present capital structure, how much of the new investment

must be financed by common equity?

b. Assuming there is sufficient cash flow for Tysseland to maintain its target capital

structure without issuing additional shares of equity, what is its WACC?

c. Suppose now that there is not enough internal cash flow and the firm must issue new

shares of stock. Qualitatively speaking, what will happen to the WACC?No numbers

are required to answer this question.