Question: I need help with these homework questions. Please complete each questions and show necessary calculations/formulas for each. 1.Alpha Enterprises has just paid a dividend of
I need help with these homework questions.
Please complete each questions and show necessary calculations/formulas for each.
1.Alpha Enterprises has just paid a dividend of $3 per share. The company then immediately announced that, due to expected cash flow issues from a large project, no dividends will be paid for the next three years. Dividends of $4, $5, and $6 per share will then be paid in each of the three years after that. Following these non-constant dividends, the company expects earnings and dividends to grow at 6% for the foreseeable future. The required return is 13% on the company's stock. What should we pay for one share of Alpha's stock today?
2.Upsilon Utilities Inc. expects a constant growth rate of 2% in its dividend payments. If the company expects to pay a dividend of $3 per share in one year's time, and its current share price is $35, what is the required rate of return on its shares?
3.Lambda banking group issued preferred shares eight years ago with a stated value of $95 and a dividend yield of 9%. What is the current price of each preferred share if the required return today is 12%.
4.Omicron company has just paid a dividend of $2 per share. Analysts of the company's shares estimate a supernormal growth rate of 30% for the company for the next two years. Afterwards, the company is expected to grow at a rate of 15% for another three years, before settling down to a stable growth rate of 7.5% forever. What is Omicron's share price in two years time (after the second year of supernormal growth), assuming a required return of 12%?
5.Rho Corporation is electing three directors to its board using cumulative voting, and there are 1,000,000 shares outstanding. if you were a shareholder who wants to be elected to the board, how many Rho Corporation shares must you own to guarantee yourself a directorship seat on the board?
6.Sigma Inc. has just paid a dividend of $2.50 per share, and its expected to pay a dividend of $2.75 per share in one years time. Assuming that required return on a similar company's equity is 15% and the dividend growth will continue at the same rate forever, what is the dividend yield and capital gains yield on Sigma's shares.
7.Jabba-Dabba- Doo Inc renovated its warehouses exactly two years ago at a cost of $3.5 million.The renovations were considered leasehold improvements, so the cost was subject to straight-line depreciation for tax purposes.The firm will not need to renovate the warehouse for another three years (from today).Given that the firm's marginal tax rate is 35% and required return is 12%, what is the present value of the remaining depreciation tax shields on the leasehold improvements. Ignore the half-year rule, and round answer to the nearest dollar.
8.A project requires an initial investment of $6 million and will yield operating cash flows of $1.5 million per year for the next 10 years. At the end of 10 years, the project's assests can be divested for $350,000.The marginal tax rate is 35%, and the CCA rate is 30%.If the required rate of return is 15%, what is the net present value of the CCX tax shields?
9.Kerfluffle Corporation is considering the purchase of a new computer system.The cost of the new system, including set-up and delivery costs of $20,000, will be $2 million.The new system will provide annual before-tax cost savings of $650,000 for the next five years.The increased efficiency of the new system will lower net working capital y $150,000 today.The CCA rate on the new system will be 30%.At the end of five years, the system can be salvaged for $125,000.The firm's required rate of return is 15%, and its marginal tax rate is 35%.What is the NPV of this cost cutting project?
10.Lemington Enterprise is considering a project to replace its fleet of 10 vehicles.The company makes a fleet replacement decision every five years.It current fleet of 10 vehicles was purchased five years ago at $50,000 each and can be sold for $10,000 each today.The new vehicles will cost $60,000 each and will bring cost savings of $100,000 per year.In five years, the new vehicles can be sold for $12,000 each.If the fleet is not replaced today, the current fleet will have no salvage value in five years time.The CCA rate on these vehicles is 30% and the company's marginal tax rate is 35%.What is the PV (CCATS) for this replacement project, assuming a required rate or return of 10%? Round answer to nearest dollar.
11.Monsoon Inc is considering bidding on government project.To do the project, the company must make an initial investment of $9 million to purchase the necessary equipment.The project will last five years, at the end of which the equipment can be salvaged for $500,000.The equipment has a CCA rat of 30%.The bidding process for the project requires the firm to submit a bid for a constant amount of $X before-tax, to be remitted by the government to the winning bidder each year.The firm's marginal tax rate is 40%, and the required rate of return on similar projects is 18%.What is the minimum bid that the firm should submit for this project? ( round to the nearest dollar)
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