1. Beef Co. in one year is expected to trade at $24 per share. And is expected to pay a dividend of 30 cents at the end of the year. If investments with equivalent risk have an expected return of 9%, what is the most you should pay for a Beef Co. stock today? What is the dividend yield and capital gain rate of this investment?
2. Bent CO. at the end of the year will have EPS of $5 and if the firm has a cost of capital of 12%:
A) if the firm decides to pay out all earning as dividends what would todays firm value be?
B) IF the firm decides to pay out 75%, 50%, or 25% of earnings and the firms return on investment is 15% what firm value will the company have?
3. What if initial sales were to be 600 million instead of 518 million and the WACC was 12% (assume the growth and other ratios are the same as before)
A) Find the enterprise value and the current stock price.
4. If BOOM inc. has a Beta of 1.3 and the current riskfree rate is 3.5% and the market return is expected to be 11%
A) What is the expected return of BOOM inc stock?
B) What if over the next year the actual market return ended up being 8% what return would you expect BOOM to have given the relationship between BOOM and the market?