ADM 2350 Winter 2008 Assign 2 Solns

# ADM 2350 Winter 2008 Assign 2 Solns - Winter 2008 ADM 2350...

This preview shows pages 1–2. Sign up to view the full content.

Winter 2008 Prof. W. Rentz FINANCIAL MANAGEMENT Assignment #2 Solutions GENERAL INSTRUCTIONS: This assignment is due at the beginning of the lab on Wed., Feb. 13 for Section P and Mon., Feb. 11, for Section Q. It is your responsibility to hand in your assignment directly to the tutor for lab associated with the section in which you are registered. Please do not hand in your assignment in the wrong lab or to the professor. This assignment counts 5% of your course grade. You are encouraged to work on this assignment in teams of up to 5 students from the same section of this course. However, you may turn in an individual assignment if you prefer. Each assignment must be typed and contain the student name(s) and student number(s) on each page. A statement of integrity must be attached to each assignment (See page 8 of the course syllabus). Each individual whose name appears on the assignment must sign the statement of integrity. 1. The Dwindling Reserves Oil Company (DROC) expects to pay a dividend of \$1,000 in fiscal 2008. DROC expects its dividends to remain at \$1,000 for fiscal years 2009 through 2014. DROC then expects to cut dividends at a compounded rate of 10 percent per year from the fiscal 2014 level for the years fiscal 2015, 2016, 2017, 2018, and 2019. Thereafter, DROC expects to cut dividends at a compounded rate of 20 percent per year from the fiscal 2019 level for the foreseeable future. Shareholders feel that the required rate of return is 20 percent. a. What is a fair market share price for DROC at the BEGINNING of the fiscal year 2020? 98 . 180 , 1 \$ 40 . 0 392 . 472 \$ 20 . 0 20 . 0 80 . 0 90 . 0 000 , 1 \$ 5 13 12 = = + × × = - = g k D P e 1/8 marks correct expression for D 13 1/8 marks correct value for D 13 1/8 marks correct expression for P 12 1/8 marks correct value for P 12 b. What is a fair market share price for DROC at the BEGINNING of the fiscal year 2015? ( 29 ( 29 ( 29 ( 29 ( 29 5 5 5 5 12 8 7 20 . 1 98 . 180 , 1 \$ 10 . 0 20 . 0 20

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 5

ADM 2350 Winter 2008 Assign 2 Solns - Winter 2008 ADM 2350...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online