Alaman Corp. just paid a dividend of $2.15 yesterday. The company is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Alaman require a rate of return of 15 percent, what should be the market price of Alaman’s stoc

• This assignment is an individual assignment.
• The Assignment must be submitted only in WORD format via the allocated folder on Blackboard.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work transparent and well presented. This also includes filling in your information on the cover page.
• Students must mention question number clearly in their answers.
• Late submitted assignments will NOT be entertained.
• Avoid plagiarism. The work should be in your own words; copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

undefined

Submissions without this cover page will NOT be accepted

College of Administrative and Financial Sciences

Assignment 3

Principles of Finance (FIN101)

Deadline: (8/04/2021 @ 23:59)

For Instructor’s Use only

Instructions – PLEASE READ THEM CAREFULLY

• This assignment is an individual
• The Assignment must be submitted only in WORD format via the allocated folder on Blackboard.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work transparent and well presented. This also includes filling in your information on the cover page.
• Students must mention question number clearly in their answers.
• Late submitted assignments will NOT be entertained.
• Avoid plagiarism. The work should be in your own words; copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

Assignment Question(s):                                                        (Marks 5)

Q1: Alaman Corp. just paid a dividend of $2.15 yesterday. The company is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Alaman require a rate of return of 15 percent, what should be the market price of Alaman’s stock ? (1 mark)

Answer

Q2: Carrefour is expecting its new center to generate the following cash flows:

1. What is the payback period for this new center. (1 mark)
2. Calculate the net present value using a cost of capital of 15 percent. Should the project be accepted? (1 mark)

Answer

Q3: Alfa corp has a capital structure which is based on 50% common stock, 20% preferred stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and the pre-tax cost of debt is 10%. The firm’s tax rate is 40%. (2 marks)

1. Calculate the WACC of the firm.
2. The firm is considering a project that is equally as risky as the firm’s current operations. This project has initial costs of $280,000 and annual cash inflows of $66,000, $320,000, and $133,000 over the next three years, respectively. What is the net present value of this project?

Answer