Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processing operators and computer programmers to business with temporary heavy workloads. Your employer is also considering the purchase of a Biggerstaff and Biggerstaff (B&B), a privately held company owned by two brothers, each with 5 million shares of stock. B&B currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&B's financial statements report marketable securities of $100 million, debt of $200 million, and preferred stock of $50 million. B&B's WACC is 11%. Answer the following questions.

A. Assume that temp force has a beta coefficient of 1.2, that the risk free rate is 7.0% and that the market risk premium is 5% what tis the required rate of return on the firm's stock

B. Assume that temp force is a constant growth company whose last dividend was $2.00 and whose dividend is expected to grow indefinitely at a 6% rate.

1. What is the firms current estimated intrinsic stock price? 2. What is the stock's expected value one year from now? 3. What are the expected dividend yield, the expected capital gains yield, and the expected total return during the first year?

C. Suppose Temp Force's stock price is selling for $30.29. Is the stock price based more on long-term or short-term expectation? Answer this based on finding the percentage of Temp Force's current stock price that is based on dividends expected during years 1,2, and 3.

D. Why are stock prices volatile? Using Temp Force as an example, what is the impact on the estimated stock price if g falls to 5% or rises to 7%? If r changes to 12% or to 14%?

E. Now assume that the stock is currently selling at $30.29. What is its expected rate of return?

F. Now Assume that Temp Force's dividend is expected to experience no constant growth of 30% from year 0 to year 1. 25% from year 1 to year 2. And 15% from year 2 to 3. After year 3 dividends will grow at a rate of 6%. What is the stock's intrinsic value under these conditions? What are the expected dividend yield and capital gains yield during the first year? What are the expected dividend yield and capital gains yield during the fourth years ( From years 3 to 4)?