Worldwide Inc. has decided to acquire another firm by purchasing the firm's outstanding stock. Analysts forecast a period of 2 years of extraordinary growth of 16%, followed by 1 year of unusual growth of 10%, and finally a normal (sustainable) growth rate of 5.5% annually indefinitely. The last dividend was D0= $1.00 per share and the required return is 8.6%. What is D4 (i.e., the dividend expected at end of period 4)?  Answer to 3 decimal places.

 

2. Consider the following:

State of the economy next period	Bad	Average	Good
Probability of that state	0.2	0.5	0.3
Go Forward Corp's  predicted return in that state	-11.5%	11.0%	16.4%

What is the overall expected return for Go Forward Corp next period? 

 

3.  A new capital budgeting project is being considered. The project will reduce expenses by $5,000 annually and increase earnings (revenue) before depreciation and taxes by $20558 annually. The project will generate $8,000 per year in depreciation of the required equipment. The firm's marginal tax rate is 40 percent. What is the project's after-tax operating cash flows (OCF)? 

 

4. Assume that you make a single, one-time investment of $2016 at time zero in an account that is expected to average 7.0% return per year for the next 30 years. How much do you expect to have in the account at the end of the 30 years?