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FIN311 Assignmrnt

This document contains 11 questions related to financial management concepts such as calculating returns, required rates of return, stock valuation, and capital budgeting techniques. Specifically, it asks the reader to calculate dividend yields, capital gains, required dividend payments, stock prices based on expected dividends and growth rates, project payback periods, net present values, and internal rates of return for various investment scenarios.

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suleman yousafzai
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89 views2 pages

FIN311 Assignmrnt

This document contains 11 questions related to financial management concepts such as calculating returns, required rates of return, stock valuation, and capital budgeting techniques. Specifically, it asks the reader to calculate dividend yields, capital gains, required dividend payments, stock prices based on expected dividends and growth rates, project payback periods, net present values, and internal rates of return for various investment scenarios.

Uploaded by

suleman yousafzai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial Management FIN311 |ASSIGNMENT

1. If current price of stock is $25 and you hold it for one year and received dividend of $2.5.
You sold it at $27. How much return you received? Show dividend yield and capital gain
separately.

2. If investor required return is 20% and capital gain is 8% how much dividend company
should pay?

3. Current price of stock is $20 and expected price after one year is 22.5. If investor
required return is 18%. What percentage of dividend should company pay?

4. You own a stock that will start paying $0.50 annually at the end of the year. It has zero
growth in future. If the required rate of return is 14%, what should you pay per share?

5. You own a stock that will start paying $0.50 annually at the end of the year. It will then
grow each year at a constant annual rate of 5%. If the required rate of return is 14%, what
should you pay per share?

6. What should you pay for a stock assuming you expect the following: a dividend of $1.00
paid at the end of years 1 and 2; cost of equity equal to 8 percent; and, a selling price of
$31 at the end of two years?

7. Assume that IBM is expected to pay a total cash dividend of $5.60 next year and that
dividends are expected to grow at a rate of 5% per year forever. Assuming annual
dividend payments, what is the current market value of a share of IBM stock if the
required return on IBM common stock is 10%?

8. Consider the following for a firm. Its stock price (P0) is at $50, its payout ratio (POR) is
0.4, its EPS1 is $2.00, and its expected return on the money retained (i) is 0.10. What is
investor’s required rate of return?

9. You own a stock that is currently selling for $50. You expect a dividend of $1.50 next
year and you require a 12% rate of return. What is the dividend growth rate for your stock
assuming constant growth?

10. What would you pay for a stock expected to pay a $2.50 dividend in one year if the
expected dividend growth rate is zero and you require a 10% return on your investment?
Financial Management FIN311 |ASSIGNMENT

11. Cash flows for two mutually exclusive projects are shown below:

Year CFM CFN


0 (100) (100)
1 10 70
2 60 50
3 80 20

Both projects have a cost of capital of 10%.

a. Calculate the payback for both projects.


b. Calculate the NPV for both projects.
c. Calculate the IRR for both projects.

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