8. Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash...

     

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8. Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dantzler's WACC is 11%. Year 1 2 3 17 45 FCF (Smillions) -11 a. What is Dantzler's horizon or continuing value? b. What is the firm's value today? 9. A stock's returns have the following distribution: Demand for company's products Probability of demand Rate of return Weak 0.1 -30% Below Average 0.1 -14% Average 0.3 11% Above Average 0.3 20% Strong 0.2 45% Calculate the stock's expected return, standard deviation, and coefficient of variation. 10. Assume that the risk-free rate is 5.5% and the required return on the market is 12%. What is the required rate of return on a stock with a beta of 2? 11. A stock has a required return of 9%, the risk-free rate is 4.5%, and the market risk premium is 3%. a. What is the stock's beta? b. If the market risk premium increased to 5%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. 8. Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dantzler's WACC is 11%. Year 1 2 3 17 45 FCF (Smillions) -11 a. What is Dantzler's horizon or continuing value? b. What is the firm's value today? 9. A stock's returns have the following distribution: Demand for company's products Probability of demand Rate of return Weak 0.1 -30% Below Average 0.1 -14% Average 0.3 11% Above Average 0.3 20% Strong 0.2 45% Calculate the stock's expected return, standard deviation, and coefficient of variation. 10. Assume that the risk-free rate is 5.5% and the required return on the market is 12%. What is the required rate of return on a stock with a beta of 2? 11. A stock has a required return of 9%, the risk-free rate is 4.5%, and the market risk premium is 3%. a. What is the stock's beta? b. If the market risk premium increased to 5%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.