Question
(Q1-A)Suppose dividend D0 = $6.00 & return rs = 11%. The expected growth rate from Year 0 to Year 1 (g0 to 1) = 20%,the
(Q1-A)Suppose dividend D0 = $6.00 & return rs = 11%. The expected growth rate from Year 0 to Year 1 (g0 to 1) = 20%,the expected growth rate from Year 1 to Year 2 (g1 to 2) = 10%, and the constant rate beyond Year 2 is 7%. What are the expected dividends for Year1 and Year 2? What is the expected horizon value price at Year 2? What is P0 actual market price of stock? 15 Marks (Q1-B)What is the future value of this cash flow stream: $200 at the end of 1 year, $250 after 2 years, and $350 after 3 years, assuming the appropriate interest rate is 15%. 10 Marks (Q1-C) Based on below values, calculate total change in cash flow by putting values of each item of Cash Flow Statement in proper structure/format. 10 Marks Cash Flow Items Value Depreciation & Amortization 5,000 Increase in Accounts Payable 15,000 Increase in Accounts Receivable (170,000) Increase in Common Shares 10,000 Increase in Inventory (647,125) Increase in Long Term Debt 300,000 Increase in Short Term Debt 30,750 Land 0 Machine 0 Net Income 157,875
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