Easy Problem Chapter 10
Untuk memenuhi tugas individu mata kuliah Accounting and Finance
Dosen
Sri Handaru Yuliati, Dra., M.B.A
Disusun oleh
Aliza Safira Salsabilla Purwanto
21/476049/NEK/25481
MAGISTER MANAJEMEN
FAKULTAS EKONOMIKA DAN BISNIS
UNIVERSITAS GADJAH MADA
YOGYAKARTA
2021
1. Miller Inc. plans to pay dividend of $1.20 a share this year and the dividend is expected
to grow 10% a year for the next 2 years due to the promotion of new products.
Thereafter, the dividend will return back to the normal level of 5% a year. What is
expected dividend per share for each of the next 4 years?
Answer:
Formula: Dt-1(1+g)
D1 = D0(1+g)
= 1.20(1+0.1)
= $1.32
D2 = D1(1+g)
= 1.32(1+0.1)
= $1.452
D3 = D2(1+g)
= 1.425(1+0.05)
= $1.5246
D4 = D3(1+g)
= 1.5246(1+0.05)
= $1.600
2. Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year (i.e.,
D1 = $0.50). The dividend is expected to grow at a constant rate of 7% a year. The
required rate of return on the stock, rs = 15%. What is the stock’s current value per share?
Answer:
D1
P0 =
r s−g
0.50
P0 =
15 %−7 %
P0 = $6.25
3. The required rate of return on Wistron Inc.’s stock is 15% and it just paid a dividend of
$1.50 a share. The stock currently sells for $25.00 a share. Assuming that the dividend
grows consistently at a fixed growth rate, what is the growth rate? What stock price is
expected 1 year from now?
Answer:
a) The growth rate
D0
g = r s−
P0
1.50
g = 15 %−
25
g = 9%
b) Expected stock’s price a year from now
P1 = P0(1+g)
P1 = 25(1+0.09)
P1 = $27.25
4. Hart Enterprises recently paid a dividend D0 = $1.25. It expects to have nonconstant
growth of 20% for 2 years followed by a constant rate of 5% thereafter. The firm’s
required return is 10%.
a) How far away is the horizon date?
The horizon date is after 2 years.
b) What’s the firm’s horizon, or continuing, value?
D1 = 1.25(1.20)
D1 = $1.50
D2 = 1.50(1.20)
D2 = $1.80
D3 = 1.80(1.05)
D3 = $1.89
D3
Horizon value =
r s−g
1.89
=
10 %−5 %
= $37.80
c) What is the firm’s intrinsic value today?
2
1.25(1.20) 1.50(1.20) 37.80
P0 = + +
1.10 1.102 1.102
P0 = $34.0909
5. Micro-Star Co. has 100 million shares of stock outstanding and its WACC is 12%.
Micro-Star is expected to generate $200 million in free cash flow next year, and the cash
flow is expected to grow at a constant rate of 6% per year indefinitely. Micro-Star is an
all equity company. What is the stock’s value per share?
Answer:
FCF 1
P0 =
WACC−g
200.000.000
P0 =
12 %−6 %
P0 = $[Link],33
P0
Stock’s value per share =
FCF 0
100.000 .000
=
3.333.333 .333,33
= $33.33
6. Foxconn Corp. has preferred stock outstanding that sells for $50 a share and pays a
dividend of $4 at the end of each year. What is the required rate of return for preferred
stockholders?
Answer:
Dp
rs =
Vp
4
rs =
50
rs = 8%