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PLEASE USE EXCEL WITH FORMULAS Problem 1 [ 5 points ] : McGaha Enterprises expects earnings and dividends to grow at a rate of 2

PLEASE USE EXCEL WITH FORMULAS Problem 1[5 points]:
McGaha Enterprises expects earnings and dividends to grow at a rate of 25% for the next 4 years, after
the growth rate in earnings and dividends will fall to zero, i.e.,g=0. The company's last dividend, D0,
was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the
current price of the common stock?
Problem 2[5 points]:
The value of Broadway-Brooks Inc.'s operations is $900 million, based on the corporate valuation model.
Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-
term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes
payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings,
and $280 million in total common equity. If the company has 25 million stock outstanding shares, what
is the best estimate of the stock's price per share?
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