Worldwide Inc. has decided to acquire another firm by purchasing the firm's outstanding stock. Analysts forecast a
Question:
Worldwide Inc. has decided to acquire another firm by purchasing the firm's outstanding stock. Analysts forecast a period of 2 years of extraordinary growth of 16%, followed by 1 year of unusual growth of 10%, and finally a normal (sustainable) growth rate of 5.5% annually indefinitely. The last dividend was D0= $1.00 per share and the required return is 8.6%. What is D4 (i.e., the dividend expected at end of period 4)? Answer to 3 decimal places.
2. Consider the following:
State of the economy next period | Bad | Average | Good |
Probability of that state | 0.2 | 0.5 | 0.3 |
Go Forward Corp's predicted return in that state | -11.5% | 11.0% | 16.4% |
What is the overall expected return for Go Forward Corp next period?
3. A new capital budgeting project is being considered. The project will reduce expenses by $5,000 annually and increase earnings (revenue) before depreciation and taxes by $20558 annually. The project will generate $8,000 per year in depreciation of the required equipment. The firm's marginal tax rate is 40 percent. What is the project's after-tax operating cash flows (OCF)?
4. Assume that you make a single, one-time investment of $2016 at time zero in an account that is expected to average 7.0% return per year for the next 30 years. How much do you expect to have in the account at the end of the 30 years?
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon