Finance
Finance
Im stuck on a question and cannot solve, is anyone here proficient with finance and can help with either of these. Whilst also being able to teach (show formula)
ABC Corporation is experiencing rapid growth. Dividends are expected to grow at 25% per year for
the next three years and then grow at 5% per year for ever. If the required return on the share is 10%
and the share currently sells for $30. Calculate the projected dividend for the coming year?
Mr. Mini Mee is the president of Evil Incorporated, a very small, but evil private company. He expects
revenues in the forthcoming year of $20 million and costs (including taxes) of $15 million. During
the subsequent five years (that is, years 2 through 6) Mr. Mini Mee forecasts that revenues and costs
will grow by 25% a year, but anticipates that all profits will need to be plowed back into the business.
Thereafter he forecasts that growth will drop to 5% a year and that he will need to plow back only 40%
of profits. Mr. Mini Mee has recently been offered $75 million in cash for the company. Is this a fair
offer if the opportunity cost of capital is 12%?
Courtney Ltd believes its latest project, which will cost $95,000 to install, will generate a perpetual
stream of cash flows of $18,000 per annum.
(i) If the discount rate for this project is 10%, what is the project NPV?
(ii) What is the project IRR?
(iii) Should the project be accepted according to the NPV and IRR rule if the required rate of return
is 10%?
For (i) i got C/r = 18,000/0.1 = $180,000
(ii) NPV = $85000
(iii) IRR 5.28%
that right?
ABC Corporation is experiencing rapid growth. Dividends are expected to grow at 25% per year for
the next three years and then grow at 5% per year for ever. If the required return on the share is 10%
and the share currently sells for $30. Calculate the projected dividend for the coming year?
Mr. Mini Mee is the president of Evil Incorporated, a very small, but evil private company. He expects
revenues in the forthcoming year of $20 million and costs (including taxes) of $15 million. During
the subsequent five years (that is, years 2 through 6) Mr. Mini Mee forecasts that revenues and costs
will grow by 25% a year, but anticipates that all profits will need to be plowed back into the business.
Thereafter he forecasts that growth will drop to 5% a year and that he will need to plow back only 40%
of profits. Mr. Mini Mee has recently been offered $75 million in cash for the company. Is this a fair
offer if the opportunity cost of capital is 12%?
Courtney Ltd believes its latest project, which will cost $95,000 to install, will generate a perpetual
stream of cash flows of $18,000 per annum.
(i) If the discount rate for this project is 10%, what is the project NPV?
(ii) What is the project IRR?
(iii) Should the project be accepted according to the NPV and IRR rule if the required rate of return
is 10%?
For (i) i got C/r = 18,000/0.1 = $180,000
(ii) NPV = $85000
(iii) IRR 5.28%
that right?
