Problem
I. A stock has a fairly stable dividend. It just paid a dividend of $1.12 and it has a stable dividend growth rate of 3.5% per year. If an investor's required return is 8.92%, then what it the estimated intrinsic value using the constant state DDM? State your answer as a dollar amount with two decimal places.
II. A stock has no dividends. The last period's FCFF is $5.34 and it has an estimated annual free cash flow growth rate of 7.1%. The WACC for this stock is 7.4% and its long term growth rate is 2.46%. It also has an ROE of 15.1%. You also found out that the firm has debt per share of $25.4. What it the estimated intrinsic value using the constant state FCFF method?
III. You are an American investor who has found an excellent opportunity to invest in Germany (the German currency is now the Euro). When you made the investment, the Euro/USD exchange rate was $1.18. Your investment did very well and earned 8.52%. You hedged the currency using a futures contract with a strike price of $1.17 Euro/USD. What is your hedged domestic return? State your answer as a percentage with two decimal places and not in decimal form (i.e. 13.21 not .1321).