# Problem 9 5 corporate valuation smith technologies is

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PROBLEM 9-5CORPORATE VALUATION Smith Technologies is expected to generate \$150 million infree cash flow next year, and FCF is expected to grow at a constant rate of 5% per yearindef-initely. Smith has no debt or preferred stock, and its WACC is 10%. If Smith has50 million shares of stock outstanding, what is the stock's value per share?
PROBLEM 9-6PREFERRED STOCK VALUATION Fee Founders has perpetual preferred stockoutstanding 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 9-7WHAT WILL BE THE NOMINAL RATE OF RETURN ON A PREFERRED STOCKWITHA \$100 PAR VALUE, A STATED DIVIDEND OF 8 PERCENT OF PAR, ANDACURRENT MARKET PRICE OF (A) \$60, (B) \$80, (C) \$100, (D) \$140?
PROBLEM 9-8PREFERRED STOCK VALUATION Ezzell Corporation issued perpetual preferred stockwith 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 itsnew market value?
The price is 125b. If \$10 generates a current yield of 12%\$10 / 0.12 = 83.3The price is 83.3

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