Wayne-Martin Electric Inc. (WME) has just developed a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As a result, WME is expected to experience a 15 percent annual growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology, and WME's growth rate will slow to 5 percent per year indefinitely. Stockholders require a return of 12 percent on WME's stock. The most recent annual dividend, which was paid yesterday, was $1.75 per share. 4. (EXCEL TEMPLATE) Use the NPV function to calculate the current stock price. 5. (EXCEL TEMPLATE) Use the NPV function to calculate the expected stock price in years 1-4. 6. (EXCEL TEMPLATE) Calculate the dividend yield and capital gains yield that an investor should

expect for each year (1-5)

Use the financial statements shown below to answer the next three questions. Dollars are in millions. Free cash flow is expected to grow at 4 percent after 2019. The weighted average cost of capital is 8.00 percent. The bonds are currently selling at 98% of par. The preferred stock has a current market value of $9 million.

Balance Sheet

	Actual 2018	Projected 2019		Actual 2018	Projected 2019
Cash	7.0	10.0	Accounts payable	90.0	108.0
Marketable securities	3.0	2.0	Notes payable	51.5	67.0
Accounts Receivable	150.0	180.0	Accruals	60.0	72.0
Inventory	200.0	180.0	Total current liabilities	201.5	247.0
Total Current Assets	360.0	372.0	Long term bonds	150.0	150.0
			Preferred Stock	10.0	10.0
			Common stock (par + PIC)	40.0	40.0
			Retained earnings	208.5	225.0
Net fixed assets	250.0	300.0	Total common equity	248.5	265.0
Total assets	610.0	672.0	Total liabilities & equity	610.0	672.0

Income Statement

	Actual 2018	Projected 2019
Sales	1,000.0	1,200.0
Operating expenses	850.0	1020.0
Depreciation	25.0	30.0
Earnings before interest & taxes	125.0	150.0
Interest	20.2	21.7
Earnings before taxes	104.8	128.3
Taxes (40% rate)	41.9	51.3
Net income before preferred dividends	62.9	77.0
Preferred dividends	0.5	0.5
Net Income available for common	62.4	76.5
Common dividends	3.9	60
Addition to retained earnings	58.5	16.5
Number of shares	75 million	75 million