RentBooks.com just paid a dividend of $4.12 and is expected to grow at 18%. You
ID: 2767203 • Letter: R
Question
RentBooks.com just paid a dividend of $4.12 and is expected to grow at 18%. You have estimated a required return of 29%. What is their current market value? Your company is paying 3.22% on their bonds outstanding, 3.22% on their preferred stock, and stock holders requiring 7.61 %. Your effective tax rate is 0.42. Of your capital structure, $340.30m of assets are funded by debt, $119.74m is preferred, and $170.15m is in common stock. What is your WACC? Harper is considering buying a Parker Sled Manufacturing bond for $215.93. This bond has a maturity value of $218, maturing in 1 years, with comparable interest rates of 24%, and coupon payments of $37. What should she pay? You are evaluating a project that will cost $1924.53 at inception, and pays $652 in 1 year, $60 in 2 years, and $664 in 3 years If your required return is 30%, what is the NPV?Explanation / Answer
6)
Stock price, P0 = D1÷(r-g)
D1 is next expected dividend
r is required return
g is growth rate
= $4.12×(1+18%)÷(29%-18%)
= $44.20