Projections for a firm whose stock you wish to value:

Years $1-7$ Years $8-11$ Years $12-24$

EPS $2\mathrm{.}354\mathrm{.}927\mathrm{.}04$

Payout Ratio $0\mathrm{.}240\mathrm{.}340\mathrm{.}54$

Stock's beta is $0\mathrm{.}9$

YTM on T$-$bond is $4\mathrm{.}6\%$

Stock premium is $5\mathrm{.}0\%$

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 $15\mathrm{.}00$ and $23\mathrm{.}00$

B Between $23\mathrm{.}00$ and $27\mathrm{.}00$

C Between $27\mathrm{.}00$ and $31\mathrm{.}00$

D Between $31\mathrm{.}00$ and $40\mathrm{.}00$

$2.$ 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 $1\mathrm{.}00$

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 $ $0\mathrm{.}02$ 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 upThe stock's 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 $50,000,000$