Gb550 unit 5 assignment
Problem (910)The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby's common stock sells for$23 per share, its last dividend was $2.00, and the company will pay a dividend of$2.14 at the end of the current year.
a. a. Using the discounted cash flow approach, what is its cost of equity?
a.
If the firm's beta is 1.6,
the riskfree rate is 9%, and the expected return on the market is 13%, then
what would be the firm's cost of equity based on the CAPM approach?
c. c. If the firm's bonds earn a return of 12 %, then what would be your estimate of rs using the overownbondyieldplusjudgmentalriskpremium approach? (Hint: Use the midpoint of the risk premium range.)
d. On the basis of the results of parts a through c, what would be your estimate of Shelby's cost of equity?
Problem (101) a project has an initial cost of $40,000 expected net cash inflows of $90,00 per year for 7 years, and a cost of capital of 11%. What is the project's NPV? (hint: Begin by constructing a time line).
(102) Refer to problem 101. What is the project’s IRR?
(103) Refer to problem 101. What is the project’s MIRR?
(104) Refer to problem 101. What is the project’s PI?
(105) Refer to problem 101. What is the project’s payback period?
(106) Refer to problem 101. What is the project’s discounted payback period?
(107) Your division is considering two investment projects, each of which requires an upfront expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
Year….Project A…………. Project B
1……... $5,000,000……….. $20,000,000
2……... $10,000,000……... $10,000,000
3……... $20,000,000……... $6,000,000
a. What are the two projects’ net present values, assuming the cost of capital
is 5%, 10%, and 15%?
b. what are the two projects’ IRR at these same costs of capital?

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Solution: Gb550 unit 5 assignment