.Solve the following.

PLEASE ANSWER IN EXCEL USING FORMULAS

Q1 Assume? Evco, Inc. has a current stock price of $53.41 and will pay a $2.25 dividend in one? year; its equity cost of capital is 11%.

What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current?price?

We can expect Evco stock to sell for $ ___ . (Round to the nearest? cent.)

Q2. Anle Corporation has a current stock price of $ 17.31 and is expected to pay a dividend of $ 1.00 in one year. Its expected stock price right after paying that dividend is $ 19.07.

a. What is? Anle's equity cost of? capital?

b. How much of? Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital? gain?

a. What is? Anle's equity cost of? capital?

?Anle's equity cost of capital is ____ ?%. ?(Round to two decimal? places.)

Q3. Summit Systems will pay a dividend of $ 1.53 this year. If you expect? Summit's dividend to grow by 5.9 % per? year, what is its price per share if the? firm's equity cost of capital is 11.5 %??

The price per share is ?$ ____ ?(Round to the nearest?cent.)

Q4. Laurel Enterprises expects earnings next year of ?$3.91 per share and has a 30 % retention? rate, which it plans to keep constant. Its equity cost of capital is 9 %?, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 2.7 % per year. If its next dividend is due in one? year, what do you estimate the? firm's current stock price to? be?

The current stock price will be ?$ _____. ?(Round to the nearest? cent.)

Q5. ?DFB, Inc. expects earnings next year of $ 5.51 per? share, and it plans to pay a $ 3.04 dividend to shareholders? (assume that is one year from? now). DFB will retain $ 2.47 per share of its earnings to reinvest in new projects that have an expected return of 14.4 % per year. Suppose DFB will maintain the same dividend payout? rate, retention? rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year.

a. What growth rate of earnings would you forecast for? DFB?

b. If? DFB's equity cost of capital is 12.4 %?, what price would you estimate for DFB? stock?

c. Suppose instead that DFB paid a dividend of $ 4.04 per share at the end of this year and retained only $ 1.47 per share in earnings. That? is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the? future, what stock price would you estimate for the firm? now? Should DFB raise its? dividend?

a. What growth rate of earnings would you forecast for? DFB?

?DFB's growth rate of earnings is ____ %. ?(Round to one decimal? place.)

Q6. Assume Gillette Corporation will pay an annual dividend of $ 0.65 one year from now. Analysts expect this dividend to grow at 12.7 % per year thereafter until the 4th year.? Thereafter, growth will level off at 1.5 % per year. According to the?dividend-discount model, what is the value of a share of Gillette stock if the? firm's equity cost of capital is 7.8 %??

The value of? Gillette's stock is ?$ _____. ?(Round to the nearest? cent.)

Q7. CX Enterprises has the following expected? dividends: $ 1.13 in one? year, $ 1.22 in two? years, and $ 1.28 in three years. After? that, its dividends are expected to grow at 3.6 % per year forever? (so that year? 4's dividend will be 3.6 % more than $ 1.28 and so? on). If? CX's equity cost of capital is 11.9 %?, what is the current price of its? stock?

The price of the stock will be ?$_____. ?(Round to the nearest? cent.)

Q8. Assume Highline Company has just paid an annual dividend of $ 1.01. Analysts are predicting an 11.3 % per year growth rate in earnings over the next five years. After? then, Highline's earnings are expected to grow at the current industry average of 5.1 % per year. If? Highline's equity cost of capital is 9.5 % per year and its dividend payout ratio remains? constant, for what price does the? dividend-discount model predict Highline stock should?sell?

The value of? Highline's stock is ?$ _____. ?(Round to the nearest? cent.)

Q9. Halliford Corporation expects to have earnings this coming year of $ 3.266 per share. Halliford plans to retain all of its earnings for the next two years.? Then, for the subsequent two?years, the firm will retain 55 % of its earnings. It will retain 19 % of its earnings from that point onward. Each? year, retained earnings will be invested in new projects with an expected return of 22.1 % per year. Any earnings that are not retained will be paid out as dividends. Assume? Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If? Halliford's equity cost of capital is 8.2 %?, what price would you estimate for Halliford? stock?

The stock price will be ?$ _____. ?(Round to the nearest?cent.)

Q10. What required return is implied by the?dividend-discount model for a stock that is selling for ?$77?, is expected to pay a dividend next year of ?$1.69?, and growth in dividends is expected to be 6.4?% per year? forever? ? (In percent, rounded to 4? decimals.)

_____ ?%

Q11. A stock is selling for ?$53.51?, and jus

Question 2. In this problem, we will consider how the rental price of capital R, and the wage rate 10, are determined under the assumptions of the Solow growth model. Suppose there exists a representative rm in this economy with Cobb-Douglas production flmction given by Y, = K313i\1. Country A and country B both have the production function 1' = F(K,L)= 41:71.. (5 Points) Does this production function have constant returns to scale? Explain. (5 Points) What is the per-worker production function, y = fat)? (10 Points) Assume that neither country experiences population growth or technological progress and that 5 percent of capital depreciates each year. Assume further that country A saves 10 percent of output each year and country B saves 20 percent of output each year. Using your answer from part (b) and the steady-state condition that investment equals depreciation, nd the steady-state level of capital per worker for each country. Then nd the steady-state levels of income per worker and consumption per worker. (15 Points) What saving rate maximizes output per worker for each country? What saving rate maximizes consumption per worker for each country? And nd the Golden Rule level of consumption, output, investment per worker for each country. (15 Points) Suppose that both countries start off with a capital stock per worker of 2. What are the levels of income per worker and consumption per worker? Remembering that the change in the capital stock is investment less depreciation, use a calculator or a computer spreadsheet to show how the capital stock per worker will evolve over time in both countries. For each year, calculate income per worker and consumption per worker. How many years will it be before the consumption in country B is higher than the consumption in country A? Country A and country B both have the production function Y=F(K, L)=K3\"L \"r\". (a) Does this production function have constant rettu'us to scale? Explahi. {h} What is the per-worker production function, y = f (k)? (c) Assume that neither country experiences population growth or technological progress and that 3 percent of capital depreciatcs each year. Assume further that country A saves 25 percent of output each year and country B saves 30 percent of output each year. Using your answer from part {b} and the steady-state condition that investment equals depreciation, nd the steady-state love] of capital per worker for each country. Then nd the steady-state levels of income per worker and consumption per worker. {{1} Suppose that both countries start off with a capital stock per worker of 3. What are the levels of income per worker and consumption per worker?I Remembering that the change in the capital stock is investment less depreciation. use a calculator or a computer spreadsheet to show how the capital stock per worker will evolve over time in both countries. For each year, calculate income per worker and consumption per worker. How many years will it be before the consumption in country B is higher than the consumption in country A? (c) Find the golden rule level of capital per worker in each country and the saving rate that supports it respectively