Problem 9 5 corporate valuation smith technologies is

PROBLEM 9-5
CORPORATE VALUATION Smith Technologies is expected to generate $150 million in
free cash flow next year, and FCF is expected to grow at a constant rate of 5% per year
indef-initely. Smith has no debt or preferred stock, and its WACC is 10%. If Smith has
50 million shares of stock outstanding, what is the stock's value per share?

PROBLEM 9-6
PREFERRED STOCK VALUATION Fee Founders has perpetual preferred stock
outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year.
What is the required rate of return?
PROBLEM 9-7
WHAT WILL BE THE NOMINAL RATE OF RETURN ON A PREFERRED STOCKWITH
A $100 PAR VALUE, A STATED DIVIDEND OF 8 PERCENT OF PAR, AND
ACURRENT MARKET PRICE OF (A) $60, (B) $80, (C) $100, (D) $140?
PROBLEM 9-8
PREFERRED STOCK VALUATION Ezzell Corporation issued perpetual preferred stock
with a 10% annual dividend. The stock currently yields 8%, and its par value is $100.
a. What is the stock's value?
b. Suppose interest rates rise and pull the preferred stock's yield up to 12%. What is its
new market value?

The price is 125
b. If $10 generates a current yield of 12%
$10 / 0.12 = 83.3
The price is 83.3