+1(978)310-4246 credencewriters@gmail.com
Select Page

Description

Ã¢â‚¬Â¢ This assignment is an individual assignment.
Ã¢â‚¬Â¢ The Assignment must be submitted only in WORD format via the allocated
folder on Blackboard.
Ã¢â‚¬Â¢ Assignments submitted through email will not be accepted.
Ã¢â‚¬Â¢ Students are advised to make their work transparent and well presented. This
also includes filling in your information on the cover page.
Ã¢â‚¬Â¢ Students must mention question number clearly in their answers.
Ã¢â‚¬Â¢ Late submitted assignments will NOT be entertained.
Ã¢â‚¬Â¢ Avoid plagiarism. The work should be in your own words; copying from
students or other resources without proper referencing will result in ZERO
marks. No exceptions.
Ã¢â‚¬Â¢ All answered must be typed using Times New Roman (size 12, double-spaced)
font. No pictures containing text will be accepted and will be considered
plagiarism).
Assignment Question(s):
(Marks 5)
Q1: Alaman Corp. just paid a dividend of \$2.15 yesterday. The company is expected to grow
at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like
Alaman require a rate of return of 15 percent, what should be the market price of AlamanÃ¢â‚¬â„¢s
stock ? (1 mark)
Q2: Carrefour is expecting its new center to generate the following cash flows:
Years
Initial
investment
Net operating
cash flows
0
1
2
3
4
5
(\$35,000,000)
\$6,000,00 \$8,000,00 \$16,000,00 \$20,000,00 \$30,000,00
0
0
0
0
0
a. What is the payback period for this new center. (1 mark)
b. Calculate the net present value using a cost of capital of 15 percent. Should the project be
accepted? (1 mark)
Q3: Alfa corp has a capital structure which is based on 50% common stock, 20% preferred
stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and
the pre-tax cost of debt is 10%. The firm’s tax rate is 40%. (2 marks)
a. Calculate the WACC of the firm.
b. The firm is considering a project that is equally as risky as the firm’s current
operations. This project has initial costs of \$280,000 and annual cash inflows of
\$66,000, \$320,000, and \$133,000 over the next three years, respectively. What is
the net present value of this project?