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FIN 350, 11S
1
Fin 350 – Business Finance
Quiz 3
NAME:______________________
SECTION: ___________
Due Date: May 16, 2001
Answer All Questions.
Read all the answers carefully and select the best answer for each question.
Use the following information to answer the next question.
The last dividend paid by Klein Company was $1.00.
Klein's growth rate is expected to be a constant 20% for 3 years, after which dividends are expected to grow at a
rate of 5% forever.
Klein's required rate of return on equity (r
s
) is 10%.
1.
What should be the current price of Klein's common stock?
a)
$30.84
b)
$58.75
c)
$21.00
d)
$50.16
e)
$42.25
What should be the current price of Ezzell’s stock?
Use the following information to answer the following
TWO
questions.
Analysts project the following free cash flows (FCFs) for Ezzell Corporation during the next 3 years, after which FCF is
expected to grow at a constant 7% rate.
Ezzell’s WACC is 12%. Ezzell has $100 in debt and 50 shares of stock.
Time
Year 0
Year 1
Year 2
Year 3
Year 4
FCF
$50
$60
$35
??
2.
What is Ezzell’s terminal value at year 3?
a)
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This note was uploaded on 09/30/2011 for the course FIN 350 taught by Professor Chen during the Spring '07 term at S.F. State.
 Spring '07
 Chen
 Finance

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