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College of Administrative and Financial Sciences
Assignment 3
Principles of Finance (FIN101)
Deadline: (8/04/2021 @ 23:59)
Course Name: Principles of Finance
Student’s Name:
Course Code: FIN101
Student’s ID Number:
Semester: 2nd
CRN:
Academic Year: 1441/1442 H, 2nd Term
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: /5
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• This assignment is an individual assignment.
• The Assignment must be submitted only in WORD format via the allocated
folder on Blackboard.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work transparent and well presented. This
also includes filling in your information on the cover page.
• Students must mention question number clearly in their answers.
• Late submitted assignments will NOT be entertained.
• 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.
• 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).
Submissions without this cover page will NOT be accepted.
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 Alaman’s
stock ? (1 mark)
Answer
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)
Answer
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?
Answer

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