1. Simon inc. Just issued a dividend of $2.61 per share on its stock. Analyst ex

Question

1. Simon inc. Just issued a dividend of $2.61 per share on its stock. Analyst expect simon's dividend to grow indefinitely at a constant rate of 5% per year. If the stocks current price is $31.50, what is Simon's cost of equity using the dividend growth model ?

2. Simon CFO disagrees with the consensus analyst growth forecast of 5%. She points to the last four years of dividends that Simons stock has paid as proof that the firm is capable of better growth.

Time paid:

Three years ago Dividend $2.07

Tow years ago Dividend 2.19

One year ago dividend 2.47

Today dividend 2.61

What is the average dividend growth rate over the last three years? Use the arithmetic average.

3. What is simons cost of equity using the new growth rate estimate taken from historical data? round the growth rate to the nearest hundredth as a percent, as in the previous question.

4. Varian corp. has three outstanding long-term debt issues. One issue has only four years left until maturity. These bonds have a face value of $1000 , pay a 12.2% annual coupon, and currently sell for 1024. What is Varian's cost of debt for this bond issue?

5. Varians other two bond issues are : a bond with 9 years remaining to maturity that has a cost of debt of 10.63% and another with 15 years until maturity that has a cost of debt of 8.95% the 4 year bonds have a total market value of $56 million, the 9 yea bonds are woth 78 million and the 15 year bonds are worth 32 million. What is varian's cost of debt for all of its outstanding long-term debt?

6. Varian also has an issue of preferred stock outstanding. Varians Preferred stock pays a constant annual dividend of 2.80 per share and currently seels for 28.75 what is varians cost of preferred stock ?

7. Collell corp has one issue of long term bonds outstanding that have a YTM of 8.3% judson used the dividend growth model approach to estimate its cost equity as 16.5 collells debt to equity ratio is 3.0 . If collels tax rate is 30% what is its weighted average cost of capital ?

8. Collell corp is considering a project that requires a 40 million investment today, but will result in annual cost savings that are expected to grow by 3% per year. Cost savings realized at the end of the first year are expected to be 3 million. What is NPV of the project?

Explanation / Answer

1) is 13.29%

4) its 11.42%

3) if 1 and 2 are correct, 3 should automatically be correct. Please check your options carefully.

Also, this is really bad to rate the answer 2 stars when I have put in so much effort to answer 8 questions in one. atleast give 4 stars

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