Question: hi i need help!! i have been working on these problems and are not sure what i am doing wrong Investors require a 16% rate

hi i need help!! i have been working on these problems and are not sure what i am doing wrong

hi i need help!! i have been working on these problems and

Investors require a 16% rate of return on Levine Company's stock (that is, r s = 16%). a. What is its value if the previous dividend was D0 = $2.00 and investors expect dividends to grow at a constant annual rate of (1) -5%, (2) 0%, (3) 7%, or (4) 14%? Round answers to the nearest hundredth. (1) $ (2) $ (3) $ (4) $ b. Using data from part a, what would the Gordon (constant growth) model value be if the required rate of return was 15% and the expected growth rate were (1) 15% or (2) 20%? Are these reasonable results? (Please Select One) I. The results show that the formula does not make sense if the required rate of return is equal to or less than the expected growth rate. II. The results show that the formula does not make sense if the required rate of return is equal to or greater than the expected growth rate. III. The results show that the formula makes sense if the required rate of return is equal to or less than the expected growth rate. IV. The results show that the formula makes sense if the required rate of return is equal to or greater than the expected growth rate. V. These results show that the formula does not make sense if the expected growth rate is equal to or less than the required rate of return. Item5 c. Is it reasonable to think that a constant growth stock could have g > r s? (Please Select One) I. It is not reasonable for a firm to grow indefinitely at a rate higher than its required return. II. It is reasonable for a firm to grow indefinitely at a rate higher than its required return. III. It is not reasonable for a firm to grow even for a short period of time at a rate higher than its required return. IV. It is not reasonable for a firm to grow indefinitely at a rate lower than its required return. V. It is not reasonable for a firm to grow indefinitely at a rate equal to its required return. Dozier 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 8% rate. Dozier's WACC is 10%. Year FCF ($ millions) 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...... NA - 12 10 37 a. What is Dozier's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. $ million b. What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. $ million c. Suppose Dozier has $147 million of debt and 34 million shares of stock outstanding. What is your estimate of the price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250. $ 2.) A stock is expected to pay a dividend of $1.00 the end of the year (that is, D 1 = $1.00), and it should continue to grow at a constant rate of 5% a year. If its required return is 12%, what is the stock's expected price 2 years from today? Round your answer to two decimal places. 3. Harrison Clothiers' stock currently sells for $29 a share. It just paid a dividend of $2 a share (that is, D0 = 2). The dividend is expected to grow at a constant rate of 3% a year. a. What stock price is expected 1 year from now? Round your answer to two decimal places. $ b. What is the required rate of return? Round your answers to two decimal places. % 4. Hart Enterprises recently paid a dividend, D0, of $4.00. It expects to have nonconstant growth of 13% for 2 years followed by a constant rate of 9% thereafter. The firm's required return is 14%. a. How far away is the horizon date? I. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. II. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. III. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. IV. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. V. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. b. What is the firm's horizon, or continuing, value? Round your answer to two decimal places. $ c. What is the firm's intrinsic value today, P0? Round your answer to two decimal places. $ 5.) Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 46% per year - during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Microtech is 13%, what is the value of the stock today? Round your answer to the nearest cent. $ 6.) Ezzell Corporation issued perpetual preferred stock with a 8% annual dividend. The stock currently yields 8%, and its par value is $100. a. What is the stock's value? Round your answer to two decimal places. $ b. Suppose interest rates rise and pull the preferred stock's yield up to 11%. What would be its new market value? Round your answer to two decimal places. $ 7.) Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $2, and its current price is $113. a. What is its nominal annual rate of return? Round your answer to two decimal places. % b. What is its effective annual rate of return? Round your answer to two decimal places. %

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