Assignment Description $1$

This assignment requires you to answer a series of questions.

Assignment Requirement $1$

Q$4-1$

MEGG Inc. just paid a dividend of $\backslash (\backslash$$ $2\mathrm{.}00\backslash )$ per share on its stock. The dividends are expected to growth at a constant $6$ percent per year indefinitely. If investors require a $13$ percent return on the stock, what is the current price? What will the price be in $3$ years? In $15$ years?

Q$4-2$

BrainSoft has $\backslash (12\backslash \%\backslash )$ coupon bonds on the market with $9$ years to maturity. The bonds make semi$-$annual payments and currently sell for $\backslash (110\backslash \%\backslash )$ of par. What is the current yield on the bonds? The yield to maturity?

Q$4-3$

ABC Corporation is a fast$-$growing supplier of office products. The company invested $\backslash (\backslash$$ $10,000,000\backslash )$ for a new machine to keep up with the market demand. The CFO, Robert Myers, estimated the company would generate the following free cash flow in the next $5$ years.

The cost of capital for the company is $\backslash (12\backslash \%\backslash ).$

$1.$ What is the firm's value today?

$2.$ If the company has $\backslash (\backslash$$ $5,000,000\backslash )$ debt and $\backslash (\backslash$$ $1,000,000\backslash )$ shares outstanding, what is the stock price of the company?