Please see problems attached. Please put answers in EXCEL separate tabs. Thank you in advance. Problems Complete the following problems from Chapters 7, 14, and 15
Chapter 7 (7-10) Preferred. Stock Rate of Return F-aal Declining Growth Stock Valuation p-,.2) Nonconstant Growth Stock Valuation {7-13} Nonconstant Growth Stock Valuation {7-14i PrefelTed Stock Valuation (7_1s) Retum on Common Stock {7-75) Constant Growth Stock Valuation (7-77| Value of Operations \iaiuation of Stocks anrl Corporaiions What is the required rate of return on a preferred stock r'vith a $50 par vaiue, a stated anrrual dir.idend of7% o{ par, and a current rnarket price of (a) $30, (b) $+0, (c) $50, and (d) $ZO (assume the market is in equilibrium with the required return equal to the expected return)? Brushy Mountain Mining Cornpany's coal reserryes are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declini.ng at the constant rate of 47o per year. If D{:} -- $6 and r. = 1496, what is the estiniirted value of Brushy Mountain's stock? Assume that the ayerage firm in your company's industry is expected to grow at a constant rate of 6% ancl that its dividend yield is 7o/o. Your company is about as risky as the average flnrr in the inriustry, but it has just successftrlly cornpleted son.re R&D rvork that leads you to expect that its earnings and dividends rvill grorv at a rate of ,509/o [Dr = D6(1 + g) = D0(1.50)l this year and25% the follor+'ir"rg year, aher which growth should return to the 6% industry-- average. if the last dividend paid (Dn) was $1, what is the esiimated vaiue per sirare of r.our firm's stock? Simpkins Corporation does not pay any dividends L"recause it is expanding rapidly and needs to retain all of its earnings. Hotr,ever, investors expect Simpkins to begin paying dividends, with the first dividend of $0.50 comins 3 years fiorn toctray. The divitlend shouid trow rapidly-at a rate of 80920 per year-dtiring Years 4 and 5. After Year 5, the iompanY shouid grow at a constant rate of 7o/o per year. If the required return on the ;tock is 16%, what is the vaiue of the stock toda,v (assi"rme the rnarket is in equilibrium with the required return equal to the expected returr)? Severai Years ago, Rolen Riders issued preferred stock rvith a stated arinual diviciend of 10% of its $100 par va1ue. Preferred stock of this Wpe currently yields 87tr. Assume dividends are paid annualiy. a. \ihat is the estimated value of Roien's preferred stock? b. Sr.rppose interest rate levels hal,e risen to the point where the preferred stock nou' rields 12%, What rvould be the netv estimated value of Roien's preferred stock? You buv a share of The Ludurig Corporation stock for S21.40. You expect it to pay dividends of $1.07, 51.1449, and $1.2250 in Years 1,2, and 3, respectively, anclyou expect to sell it at a price o{ $26.22 at the end of 3 years. a. Caiculate the grolr..th rate in dividends. b. Calculate the expected dividend vield. c" Assurning that the calculated growth rate is e,xpected to continue, you can add the dividend vield to the expected grou,th rate to obtain the expected total rate of return. rhat is this stock's expected total rate of return (assume the niarket is in equilibrium urth the required return equal to the expected return)? lnvestors require a 13% rate ofreturn on Brooks Sisters's stock (r. = 139io). a. What would the estirnated value of Brooks's stock be if the previous diviclend were Dc = $3.00 and if investors expect dividends to grow at a constant annual l"ate of (1) -s96, t2) 0%, (3) 57r,, and (4) 107oi b. Using data from part a, what is the constant growth model's estimated value for Brooks Sisters's stock ifthe re r.? Kendra Enterprises has never paid a dir.idend. Free cash flor,v is projected to be $tJ0,000 and $100,000 fbr the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 87o. The company's weighted average cost of capital is 12?6.